Biden’s Restrictions on China

Biden’s Restrictions on China

According to Iran Gate, Biden has banned a wide range of US investments in advanced technology in China due to national security concerns. This directive, which will be implemented next year, restricts investment in semiconductors, microelectronics, quantum technology, and artificial intelligence. On Thursday, August 9, President Biden signed an executive order that limited specific US investments in sensitive technologies in China, and investment in other technology sectors requires government notification.

The long-awaited order allows the US Treasury Secretary to prohibit or restrict specific US investments in Chinese companies in three sectors: semiconductors, quantum information technology, and artificial intelligence systems. In a letter to Congress, Biden wrote that he declares a national emergency to counter the threat posed by countries like China in sensitive technologies and vital products for the military, intelligence services, surveillance capabilities, or cyber capabilities.

The Chinese Ministry of Commerce in Beijing has accused the United States of disrupting the global industry and supply chain, according to a statement by the Chinese Ministry of Commerce. The executive order seriously deviates from the principles of market economy and fair competition that the United States has always promoted, and it has affected the normal operations and decision-making of companies, weakening the international economic and trade order.

In response to this plan, the Chinese Ministry of Foreign Affairs stated on Friday, August 10th that it is deeply concerned about this directive and considers its right to take key measures to protect itself. Furthermore, the country is strongly dissatisfied with the insistence of the United States on imposing investment restrictions in China, and it firmly opposes both this plan and the submission of official representations to the United States.

The ministry added that it hopes the United States will respect the laws of market economy and the principle of fair competition, and refrain from creating barriers to trade, economic cooperation, and global trade, as well as hindering global economic improvement.

Semiconductors are a priority.

This proposal aims to invest in Chinese companies that are developing software for designing computer chips and tools for their production. The United States, Japan, and the Netherlands have expertise in these areas, and the Chinese government is seeking to create domestic alternatives. The White House said that Biden has consulted with our allies about this plan and has included feedback from G7 countries in it.

Chuck Schumer, the leader of the Senate Democrats, praised Biden’s decision and said that the United States has been helping China’s military growth for a long time. Today, the United States is taking the first strategic step to ensure that American investments do not contribute to China’s military advancement. The Treasury Department announced that the regulations only affect future investments, not existing ones, but it may request disclosure of previous transactions.

This action could lead to tensions between the two largest economies in the world. Although US officials insisted that these restrictions are aimed at countering the most severe national security threats and not separating the economies of the two countries, which are heavily interdependent, the Chinese embassy in Washington said it is very disappointed with this move.

Republicans believe that this plan is not aggressive enough. Michael McCaul, the chairman of the House Foreign Affairs Committee, praised this move to restrict new foreign investments in China, but expressed concerns about the failure to include existing investments and sectors such as biotechnology and energy.

The purpose of this plan is to prevent American capital and expertise from supporting the development of technologies that could bolster China’s military modernization and undermine US national security. This plan focuses on private equity investments and venture capital.

Some expected exemptions include:

This plan prohibits certain transactions and requires investors to notify the government about their plans for other investments. The Treasury Department expects that some potential transactions, including transactions in public instruments and intra-company transfers from US parent companies to subsidiary companies, will be exempted.

The Chinese technology industry, which was once a magnet for risky investments from the United States, has witnessed a significant decline in US investment due to intensified geopolitical tensions. According to Pitch Book data, last year, total US venture capital investment in China decreased from $329 billion to $97 billion in 2021. So far this year, the US Venture Capital Association has only allocated $12 billion to innovative technology startups in China.

An informed individual told Reuters that regulations related to artificial intelligence are still being finalized. The same person added that the same applies to quantum computing, but it is expected that special sensors and other related items for this technology will also be declared prohibited. Finally, it was added that potential exemptions may exist for universities and research projects.

There are concerns about legal loopholes among Republicans.

Senator Marco Rubio said that President Biden’s proposal is almost laughable. He explicitly stated that the plan is full of loopholes and ignores the dual-use nature of important technologies, and does not include industries that the Chinese government considers vital.

Liu Pengyu, the spokesperson for the Chinese Embassy in Washington, said that the White House has not paid attention to China’s deep concerns about this plan. In a statement, he announced that over seventy thousand American companies trade with China. He also emphasized that these restrictions harm both Chinese and American businesses, disrupt normal cooperation, and reduce investor confidence in the United States. Pengyu added that China will closely monitor the situation and firmly protect its rights and interests.

Emily Benson from the Center for Strategic and International Studies (CSIS), a bipartisan think tank, said that she expects investment in artificial intelligence for civilian and military use to be banned, and that other investments in this sector only require notification to the government.

Benson said that the responsibility for determining which artificial intelligence falls into the military category will be the government’s. He added that they must draw up a list of military applications of artificial intelligence and define artificial intelligence. He emphasized that the key questions are how this plan will impact U.S. allies and how China will respond.