KEY POINTS
- President Joe Biden is set to unveil an executive order screening certain outbound investments to China.
- The order aims to prevent technologies that could aid China’s military modernization.
- Regulations from this order will target specific sectors like semiconductors, quantum computing, and artificial intelligence.
An impending executive order from President Joe Biden will address the regulation of outbound investments in sensitive technologies bound for China. This initiative has arisen from concerns surrounding the possibility of U.S. capital and expertise inadvertently enhancing China’s military capabilities.
Key sectors, including but not limited to U.S. private equity, venture capital, and joint ventures investing in China’s realms of semiconductors, quantum computing, and artificial intelligence, will be encompassed by this order. A significant number of investments in these sectors will mandate governmental notification. Furthermore, specific transactions might be barred based on information from confidential sources.
Former U.S. Commerce Department official, Cordell Hull, has articulated that existing restrictions on exports and inbound investments will be complemented by this new order, aiming to better regulate the flow of capital into China. Although immediate enforcement of the order is not projected, the administration is set to seek public feedback on its proposals, subsequent to preliminary discussions with relevant stakeholders and international counterparts.
In a previous interaction with Chinese representatives, U.S. Treasury Secretary Janet Yellen broached the topic of potential restrictions. She clarified that any ensuing limitations would be limited to sectors that have direct implications on national security.
When approached about the potential order, Liu Pengyu, the spokesperson for the Chinese Embassy in Washington, emphasized the recurrent U.S. narrative of contextualizing technology and trade within the national security framework. He assured that China remains vigilant and will steadfastly uphold its national interests.
Laura Black, who previously held a position with the Committee on Foreign Investment in the United States, alluded to the fact that this order may not operate on a case-by-case review mechanism akin to the CFIUS. Nevertheless, it is poised to lay down restrictions on select investments. Disclosure about the order is anticipated early next week, though past schedules suggest potential shifts in timelines.
Confidential sources hint at the order’s alignment with the export control guidelines previously established for China by the U.S. Department of Commerce. With respect to investment policies, Emily Kilcrease, an ex-U.S. official, commented on ongoing endeavors to delineate the boundaries of artificial intelligence and the broader aim to oversee U.S. offshore investments. Kilcrease also hinted at the possibility of a responsive action from China in the wake of these regulatory measures.
Simultaneously, a defense policy bill under review in the U.S. Senate recently witnessed the passing of an amendment concerning outbound investments. While this draft legislation underscores the requirement to disclose certain outbound investments, it does not propose any explicit prohibitions. Highlighting the significance of this matter, Sen. Bob Casey emphasized the criticality of overseeing investments in sectors fundamental to national security, especially in relation to China. He also stated that the Outbound Investment Transparency Act, an amendment he was instrumental in introducing, is geared to enhance the foundational principles of the executive order.
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