The Biden administration plans to ban US investments in some Chinese tech companies, sources have revealed.
The government also stop American firms pouring money into sensitive Chinese sectors, most notably the chip sector, and to increase scrutiny of key areas.
The ban is expected to apply to some investments tied to chip production, two sources said. The plan will be laid out in an executive order the White House is expected to unveil in the coming months.
The upcoming rules are likely to track sweeping new restrictions the US placed on exports of American chips used for artificial intelligence (AI), chipmaking tools, and supercomputers, among other technologies, to China last October, the sources said.
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China hawks in Washington blame American investors for transferring capital and valuable know-how to Chinese tech companies that could help advance Beijing’s military capabilities.
The White House declined to comment.
“No restriction or repression can stop the pace of China’s scientific and technological development,” a spokesperson for the Chinese Embassy in Washington said in a statement. “The US politicians’ unwarranted restrictions on normal trade and economic cooperation between China and the US will only …miss development opportunities.”
Relations with China have soured after one of its surveillance balloons was spotted over the United States, prompting China watchers to anticipate more punitive measures from Washington against Beijing in the short term. That could include the long-awaited outbound investment order.
‘Tell us about investment plans’
In addition to the ban on some investments, a broad swathe of transactions would be considered “notice and go,” requiring the investors to simply advise the government of their plans, with no risk of disapproval.
The Biden administration would give industry a chance to weigh in on proposed rules before the plan took effect, a source said.
While details of the order could change, the tiered approach shows the Biden administration is trying to take a scalpel to controlling US investments in China after its unilateral roll-out of the October export curbs on China angered allies and US firms.
It also illustrates the government’s desire for more information on US investment in Chinese tech startups.
A report by a Georgetown University think tank earlier this month showed US investors including the investment units of chipmakers Intel Corp and Qualcomm accounted for nearly a fifth of investments in Chinese AI companies from 2015 to 2021, transactions valued at $40.2 billion.
The executive order, previously expected for the fourth quarter of last year, was further delayed in part to avoid antagonizing Beijing ahead of Secretary of State Antony Blinken’s planned February trip to China. That trip was later postponed because of the Chinese spy balloon.
National security adviser Jake Sullivan first flagged the issue in July 2021 when he said outbound US investment flows into Chinese technology might harm national security and undermine export controls.
Peter Harrell, a White House official who left the administration late last year, told a House of Representatives committee earlier this week that he “strongly” recommended the government establish “a narrowly tailored regime” requiring disclosure of investments in certain key Chinese technologies with the ability to “limit or block the small number of transactions that are likely to raise serious national security risks.”
Efforts to incorporate an outbound investment screening plan in legislation failed last year in Congress.
However, a spending bill signed into law in December gave the US Departments of Treasury and Commerce $10 million each to identify what it would take to implement a programme to address national security threats from “outbound investment” in certain sectors. Their reports are due later this month.
- Reuters with additional editing by Jim Pollard
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