President Joe Biden unveiled the new order on Wednesday (9 August), stating that investment into the Chinese advanced chips and artificial intelligence sectors would also be monitored.
He said technological progress in these sectors posed “significant national security risks” such as using computers to develop sophisticated weapons or even break into data protected by advancing cryptographic coding.
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The US government also said it will require US firms to notify the Treasury Department of such investments in Chinese artificial intelligence and semiconductor technology.
This will mainly impact private equity and venture capital firms as well as US-Chinese joint ventures.
Today, China’s commerce ministry responded to the order, saying it was “seriously concerned”.
The ministry said it “deviates from the principles of fair competition and the market economy that the US consistently advocates” and that Beijing retained the right to take countermeasures.
Meanwhile, Liu Pengyu, a spokesperson for the Chinese embassy in Washington, said the US “has continuously escalated suppression and restrictions on China”.
US Republicans however criticised the announcement for not being stricter. Nikki Haley, one of the GOP presidential contenders, said it was “not even a half measure”.
“To stop funding China’s military, we have to stop all US investment in China’s critical technology and military companies, period,” she added.
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The move puts more pressure on an already strained relationship between the US and China after a suspected spy balloon flew over the US earlier this year.
Biden and President Xi Jinping agreed at the G20 in October to try to stabilise relations and make sure competition did not turn info conflict.
The news momentarily nudged Chinese equities downwards this morning, with Hong Kong’s Hang Seng index falling 0.6% and China’s CSI 300 down 0.1% on market open.
Elsewhere in the region, South Korea’s Kospi fell 0.5% while Japan’s Topix was up by 0.2%. Much of this has now picked back up as at 7.50am.
In the UK, prime minister Rishi Sunak said earlier this year, that the government would consider curbs on outbound investment, while a survey by the Institute of Directors found that one in five UK importers had already switched investments away from China due to geopolitical tensions.
