U.S. aims to curtail technology investment made inside China
Growing concerns about China’s military and economic ambitions have lawmakers and the White House weighing yet another effort to restrict Beijing’s access to advanced technologies that could be used in war.
This time, the U. S. government appears poised to extend its restrictions to a new area: U.S. dollars that are used to finance the development of such technologies within Chinese borders.
For months, the Biden administration has been preparing curbs on the investments that U. S. firms can make in China, particularly in areas such as advanced computing.
Those measures are now largely complete and could be issued within two months. The Treasury Department has been reaching out to other governments, including the European Union, to try to ensure that they do not rush in to provide similar financing to China after the United States cuts it off, according to people familiar with the discussions.
The voyage of a spy balloon across the United States has set off newfound fears about the national security threats posed by the Chinese government. This week, lawmakers on both sides warned the White House that if the administration did not move ahead with investment restrictions, Congress would propose its own.
At a hearing Tuesday aimed at publicizing the security threat from China, Rep. Blaine Luetkemeyer, R-MO., said it was the “committee’s job to examine all interconnections between the Chinese and U.S. economy, specifically connections supporting China’s military and human rights abuses, and pursue options to eliminate U. S. capital flowing into those areas.”
Rep. Maxine Waters, DCalif., said the United States needed to make sure that “hedge funds, private equity firms and Wall Street are not investing in ways that hurt our economy or funding the adversarial actions of the Chinese government.”
Members of the Biden administration spent much of last year weighing how broadly to apply investment restrictions, with officials reaching out to business executives to get their views on the impact that such a move might have.
Details of the pending executive order remain unclear, but it is expected to require companies to report more information to the government about their planned investments in certain adversarial countries. Several people familiar with the plans said the order would most likely prohibit outright investments in some sensitive areas, such as quantum computing, advanced semiconductors and certain artificial intelligence capabilities with military or surveillance applications.
U.S. officials have also increasingly been concerned about China’s use of biotechnology, but several people said the administration had decided to exclude the sector, at least initially.
Supporters of investment restrictions say they would help fill in a significant hole in the economic barriers that the United States is setting up with China. The government already prohibits U.S. companies from directly selling certain advanced technologies to China, and it has long monitored the investments that Chinese companies make in the United States for potential security risks.
But the government has little control over or insight into money traveling from the United States to China, said Claire Chu, a senior China analyst at Janes, a defense intelligence firm. Support has been building for the government to take more oversight of these kinds of deals, she said.
“It’s not so much a matter of whether this will happen as when,” Chu said.
Some of the proposals have prompted resistance from industry groups, which argued that overly broad restrictions could overwhelm government officials in charge of oversight, creating big delays, and ricochet back on the U.S. economy, harming its competitiveness. A broader proposal in Congress last year to review outbound investments in critical sectors including infrastructure and medicine prompted pushback from groups such as the U.S. Chamber of Commerce and the U.s.-china Business Council.
“Industry is kind of united: We don’t want this,” said Antonia Tzinova, a partner at the law firm Holland & Knight who specializes in national security reviews of investments into the United States.
The Biden administration’s plan appears to be much more narrowly targeted at a few sensitive sectors. But some industry representatives remain concerned that measures that apply only to U. S. firms, and not their foreign competitors, could put U.S. businesses at a disadvantage.