President Joe Biden’s recent executive order calling for the ban on some investments in China’s tech sector still has a long way to go before being fully implemented, but it could be the beginning of meaningful change in the U.S.–China competition, experts say.
Eric Sayers, a nonresident fellow at the American Enterprise Institute think tank, said the administration’s rules regarding investments into China’s artificial intelligence, quantum, and semiconductor sectors would likely take a full year to be honed and implemented.
“The pessimistic way to look at this is the administration spent a year briefing everyone, consulting on this process, only to start a new consulting clock here,” Mr. Sayers said during an Aug. 11 talk at the Center for a New American Security.
“And it’s likely to be another year before the final rule of this process even comes out.”
Nevertheless, Mr. Sayers said, the move does represent an “expanded willingness” by the executive branch to focus on flows of finance and technology as means to improving national security.
“This [type of action] wasn’t thinkable a couple of years ago,” Mr. Sayers said.
Biden Order Chooses Targets Carefully
President Biden’s executive order, signed on Aug. 9, declares a national emergency regarding the “unusual and extraordinary threat” posed by “countries of concern” that are using U.S. investments into critical technologies to advance their own domestic military and intelligence capabilities.
It also grants authority to the Secretary of the Treasury to bar investments into artificial intelligence (AI), quantum information technology, and semiconductor and microelectronics manufacturing if such an investment is deemed to benefit the military modernization of such a nation.There already has been some debate about the efficacy of the proposed rules and how much they may be watered down in the lengthy comment period. The order’s limited, middle-of-the-road approach will also likely draw pushback from both sides of the China debate as congressional hawks seek greater decoupling from China’s economy and industry leaders seek more engagement.
Peter Harrell, a nonresident fellow at Carnegie Endowment for International Peace, said that the discussion around targeting outbound investments into China has been growing since 2018, when the Trump administration levied tariffs against Chinese imports as retaliation for rampant intellectual property theft.“That discussion triggered an ongoing debate in Washington about where and how and whether certain U.S. investments in China might pose a risk to national security,” he said.
Mr. Harrell also said that although the scope of the proposed investment bans is fairly narrow, the criteria for investments that require federal notification are broad. This means that most investments won’t be banned outright, but the government will be able to gather a much more comprehensive picture of outbound U.S. investment.
“They basically did what they said they were going to do, which is something narrow and targeted,” Mr. Harrell said of the actions.
US Money, Tech Fueling China’s Military
The rules will focus in part on giving the administration better tools for preventing U.S. private equity and venture capital from flowing to Chinese entities that might provide an “edge” to the regime’s military.
U.S. tech companies and venture capital firms have long invested in entities associated with the military wing of the Chinese Communist Party (CCP), with little interference from the federal government.
To that end, the bipartisan House Select Committee on the CCP is opening investigations into several U.S. venture capital firms that it claims are funding China’s development of AI and spurring its military modernization.
The regime is also stealing technologies, including AI and quantum cryptography systems, that will have crucial military importance in the coming years, according to U.S. Ambassador to China Nicholas Burns.
“[Technology] is in many ways the heart of the competition,” Mr. Burns said at a June meeting of the Global Leadership Coalition.“All of those technologies are going to be militarized.”
Mr. Burns added that the CCP, which rules China as a single-party state, is engaged in the “consistent and persistent theft of intellectual property” to accelerate “forced technology transfer” from the United States.
That malign influence, he said, is making it difficult for the United States and the CCP to peacefully compete, and will have ramifications for U.S. security in the region in both the near and long term.
