US-China Tech Investment Ban Shows Promise, but Progress is Slow: Experts
President Biden’s Executive Order Signals Potential Change in US-China Competition
According to experts, President Joe Biden’s recent Executive Order calling for the ban of certain investments in China’s tech sector could mark the beginning of significant change in the competition between the United States and China.
Eric Sayers, a nonresident fellow at the American Enterprise Institute think tank, believes that it will take about a year for the administration to refine and implement the rules regarding investments in China’s artificial intelligence, quantum, and semiconductor sectors.
“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.
Despite the lengthy process, Mr. Sayers sees this as a positive step, as it demonstrates an “expanded willingness” by the executive branch to prioritize finance and technology flows for the sake of national security.
Looking ahead, Mr. Sayers remains hopeful that the coming year will initiate an “iterative” process that will lead to a resilient policy over the course of years and even decades.
Biden Order Targets Critical Technologies
President Biden’s executive order, signed on Aug. 9, declares a national emergency in response to the “unusual and extraordinary threat” posed by countries using U.S. investments to advance their military and intelligence capabilities.
The order grants the Secretary of the Treasury the authority to prohibit investments in artificial intelligence (AI), quantum information technology, and semiconductor and microelectronics manufacturing if they are deemed to benefit a nation’s military modernization.
The Treasury has also released proposed rules and is seeking public comment on their implementation, which will undergo a lengthy comment period before being formally adopted within the next year.
There has already been some debate about the efficacy of the proposed rules and the potential for them to be watered down during the comment period. Additionally, the order’s limited approach is likely to face criticism from both sides of the China debate, with some advocating for greater decoupling and others seeking more engagement.
Peter Harrell, a nonresident fellow at Carnegie Endowment for International Peace, explains that the discussion around targeting outbound investments into China has been ongoing since 2018, when the Trump administration imposed tariffs in response to intellectual property theft.
Mr. Harrell also notes that while the investment bans have a narrow scope, the requirements for federal notification of certain investments are broad. This will allow the government to gain a more comprehensive understanding of outbound U.S. investment flows.
Sarah Bauerle Danzman, a senior fellow at the Atlantic Council think tank, believes that the proposed rules align the U.S.’ strategic posture with those recognized by partners and allies, paving the way for a more unified response to China.
US Investments and Technology’s Impact on China’s Military
The rules will focus on preventing U.S. private equity and venture capital from flowing to Chinese entities that could enhance the regime’s military capabilities.
For years, U.S. tech companies and venture capital firms have invested in entities associated with the military wing of the Chinese Communist Party (CCP) with little interference from the federal government.
In response, the bipartisan House Select Committee on the CCP is launching investigations into several U.S. venture capital firms accused of funding China’s AI development and military modernization.
The regime’s theft of critical technologies, including those obtained from the United States, further underscores the need for measures to address this issue.
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