A new stress test for a tense relationship: US wants to prevent Beijing from gaining knowledge of sensitive technologies.
The US government wants to regulate some investments from the US in China to protect sensitive technology. President Joe Biden issued an executive order on Wednesday. A government official in Washington said, “We want to prevent China from acquiring and using highly advanced technologies to promote military modernization and undermine US national security. This is a measure to protect national security and not a ban on investment.”
According to the US government, the following sectors will be affected: semiconductors, some artificial intelligence systems and quantum information technologies. The latter enables the computation of algorithms too complex for today’s computers. US investments in such sectors in China may be banned by the government in the future after an investigation. Certain investments may require a statement.
The order was directed against “countries in question” – although China was the only one expressly mentioned. At its core is ensuring that capital does not flow heavily from the United States into industrial sectors of rival countries that are critical to America’s national security—for example, in the defense or technology sectors.
Biden continues to rely on Trump’s punitive tariffs
The U.S. official said they want to prevent China from gaining knowledge of highly advanced technologies and then using it to advance military modernization and undermine U.S. national security. The aim is not to undermine existing export controls. Not to stop money flowing to China. “China does not need our money. (…) What they lack is knowledge». The program follows a similar methodology whereby certain large foreign investments in the United States are pre-screened in critical areas.
Relations between the US and China have long been tense, including over the economy. Biden abandoned punitive tariffs against the People’s Republic introduced by his predecessor, Donald Trump. Democrats have launched massive investments in America to make America’s supply chains more independent — above all from China. The United States also imposed export restrictions to deny the country access to American technologies.
The US and China are the world’s two largest economies – and they are closely intertwined. Along with its direct neighbors Canada and Mexico, China is one of the three largest trading partners of the United States.