(Singapore Aug 10, 2023) US President Biden has signed an executive order banning new American investment in key technology industries that could be used to enhance Beijing’s military capabilities.
This is the latest in a series of moves putting more distance between the world’s two largest economies.
The order will prohibit venture capital and private equity firms from pumping more money into Chinese efforts to develop semiconductors and other microelectronics, quantum computers and certain artificial intelligence applications.
“The Biden administration is committed to keeping America safe and defending America’s national security through appropriately protecting technologies that are critical to the next generation of military innovation,” the Treasury Department said in a statement, which also emphasized that the executive order was a “narrowly targeted action” complementing existing export controls.
A New York Times report, however, states “Narrow or not, the new order comes at perhaps the most fraught moment in the U.S.-China relationship since President Richard M. Nixon and Secretary of State Henry A. Kissinger opened a dialogue with Beijing in the early 1970s.”
A series of expanding export controls on key technologies to China has already triggered retaliation from Beijing, which recently announced the cutoff of metals like gallium that are critical for the Pentagon’s own supply chain, the report said.
As with its normal practice, China has declared that it was “very disappointed” by the order, which it said was designed to “politicize and weaponize trade,” and it hinted at retaliation.
“The latest investment restrictions will seriously undermine the interests of Chinese and American companies and investors, hinder the normal business cooperation between the two countries and lower the confidence of the international community in the U.S. business environment,” said Liu Pengyu, a spokesman for the Chinese embassy, in a statement.
In much of the past few decades, the US has encouraged American investors to deepen their ties in the Chinese economy, viewing that as a way to expand the web of interdependencies between the two countries that would gradually integrate Beijing into the Western economy and force it to play by Western rules.
In recent years, however, the US government believes that investments in new technologies and joint ventures were fueling China’s military and its intelligence-collection capabilities, even if indirectly.
American officials have actively been sharing intelligence reports with allies to make the case that Western investment is key to China’s military modernization plans — especially in space, cyberspace and the kind of computer power that would be needed to break Western encryption of critical communications.
So far, the US has been prohibiting or restricting the export of certain technologies and products to China. The new order means that American money, expertise and prestige cannot be used to help China to develop its own versions of what it cannot buy from American companies.
The decision from Washington comes at a moment of vulnerability for the Chinese economy. Consumer prices in China, which had barely risen over the previous several months, fell in July for the first time in more than two years. Not to mention the record-high youth unemployment rate.”
