President Joe Biden on Wednesday issued an executive order banning U.S. investments flowing into China’s technology sectors, including semiconductors and microelectronics, quantum computing and artificial intelligence.
The order would prohibit private equity and venture capital investments flowing into sectors that Biden said help Beijing gain a military advantage by developing “new applications that pose significant national security risks, such as the development of more sophisticated weapons systems, breaking of cryptographic codes, and other applications that could provide these countries with military advantages.”
In addition to capital flows, Chinese companies getting U.S. investments benefit from other intangible gains such as managerial know-how, market access and links to broader financial networks, the order said. The ban applies to China and its special administrative regions of Hong Kong and Macau.
Declaring a national emergency to address the threat, Biden directed the Treasury secretary, in consultation with the Commerce Department and other departments and agencies, to formulate rules requiring private equity and venture capital firms to notify the U.S. government of outbound investments. The rules would also specify the types of investments and technology areas that are prohibited.
The order noted that China eliminates “barriers between civilian and commercial sectors and military and defense industrial sectors, not just through research and development, but also by acquiring and diverting the world’s cutting-edge technologies, for the purposes of achieving military dominance.”
