The Biden administration will reportedly prohibit American investments in Chinese technology companies under an executive order the president will release Wednesday — a move designed to shore up national security concerns amid growing tensions between the superpowers.
US-based private equity and venture capital firms will face restrictions in investing three key Chinese sectors: artificial intelligence, quantum computing and semiconductors, a senior government source told Reuters.
The plans are aimed at preventing capital and expertise from helping develop technologies that could support the Communist regime’s military modernization and threaten US national security.
“The inability to trust not only what comes out of the Chinese government but what they do with the data they have access to is the motivation for banning future investments in China,” Matthew Carbray, a managing partner at Connecticut-based Ridgeline Financial Partners LLC, told The Post on Wednesday.
The new measures will not go into effect immediately and provide for a comment period to consider industry feedback before being finalized.
Biden administration plans to require firms making investments in a broader range of Chinese industries to report that activity, which will give the US government great visibility into financial transactions between the two countries, according to The New York Times, which first reported the move.
Emily Benson, of the Center for Strategic and International Studies, a bipartisan policy research organization, said she expects investments in artificial intelligence to be prohibited to military users and uses, and that other investments in the sector will only require notification to the government.
Benson said the burden will fall on the administration to determine what AI falls into the military category.
“They will have to draw a line of what constitutes a military application of AI, and to define AI,” said Benson, director of CSIS’s project on trade and technology.
Relations between the US and China are at a low point due to disagreement over economic and defense matters, including the future status of Taiwan, Chinese military expansion in the South China Sea, trade imbalances, intellectual property and human rights.
The Biden administration has made moves to limit the scale of US economic involvement in China in hopes of boosting domestic industries, including the burgeoning American semiconductor and microchip sectors.
“As the Chinese military continues to fortify their position on a global scale, the US government wants to maintain its position as the world’s strongest military presence,” Carbray told The Post.
“As it relates to US-bound investments into China, the lack of transparency is concerning to government officials and our competitive age in technology would be undermined without this legislation.”
A White House spokesperson referred The Post to comments by top administration officials, including Treasury Secretary Janet Yellen, who told Chinese officials that the US wants healthy economic competition but will defend trade curbs imposed on security grounds.
Biden administration officials have stressed for months any restrictions on US investment in China will be narrowly targeted.
“These are tailored measures,” National Security Adviser Jake Sullivan said in April. “They are not, as Beijing says, a ‘technology blockade’.”
The restrictions on American investments in China come at a perilous time for Beijing’s economy.
The ruling Communist Party reported on Tuesday that Chinese exports fell in July to a low not seen since the start of the coronavirus pandemic — a sign that US companies and consumers are shunning Chinese-manufactured products.
Last October, the Biden administration angered Beijing after it introduced rules that bar Chinese firms from buying advanced chips and chip-making equipment.
This story originally appeared on NYPost
