US President Joe Biden has restricted some important investments in China. He has stopped certain new investment in technology in China and has signed an executive order to implement it. The technologies include computer chips and other sensitive ones while other technologies require government notification for investment.
The order makes it official to ban or regulate US investments in China in three areas: semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems. The government clarified that the prohibitions would be applicable to “narrow subsets” among the three classifications and said that the offer is subjected to public opinion.
The president signed the order to let neither expertise nor capital travel from the US to China to aid the East Asian country from building technologies to enhance its military modernization and threaten US national security. The capital aims at preventing private equity, venture capital, joint ventures and greenfield investments.
Democratic President Joe Biden wrote to Congress to declare a national emergency in response to the threat posed by the development of “sensitive technologies and products critical to the military, intelligence, surveillance, or cyber-enabled capabilities” by nations like China.
In response to the directive, China declared on Thursday that it is “gravely concerned” and that it reserves the right to take action.
According to a statement from the Chinese Commerce Ministry, the order interferes with businesses’ regular operations and decision-making processes and threatens the global economic and trade order.
The Chinese ministry expressed its hope that the United States will uphold the rules of the free market and the idea of fair competition, abstain from “artificially hindering global economic and trade exchanges and cooperation, or set up obstacles for the recovery of the world economy.”
The Chinese Foreign Ministry stated that the government has made serious representations to the United States and was “strongly dissatisfied” with and “resolutely opposes the US’s insistence on introducing investment restrictions on China.”
According to a statement from the ministry, China encouraged the US to keep its pledge to Biden that it would not disconnect from China or block its economic progress.
Some transactions will be prohibited by the decree, while others will require investors to inform the government of their plans. According to the Treasury, it plans to exclude “certain transactions, including potentially those in publicly traded instruments and intracompany transfers from US parents to subsidiaries.”
US investment in the Chinese tech sector, which was once a magnet for venture capital, has already drastically decreased due to rising geopolitical tension.
According to data from PitchBook, total venture capital investment from the United States into China dropped to $9.7 billion from $32.9 billion in 2021. US venture capitalists so far this year have invested only $1.2 billion in Chinese digital businesses.
According to a person briefed on the directive, the policy is anticipated to go into effect the next year following numerous rounds of public debate, including an earlier 45-day comment period.