White House Unveils Ban On US Investment In Chinese Tech Sectors

White House Unveils Ban On US Investment In Chinese Tech Sectors

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The Biden administration will block some US investment in China's quantum computing, advanced chips and artificial intelligence sectors.

The new order, announced by President Joe Biden on Wednesday, will take effect next year and will require companies to report to the government about other investments in three Chinese sectors.

The action will mainly affect private equity and venture capital firms and US investors in joint ventures with Chinese groups.

A senior US official said the administration would create a "very specific" program that would focus on three areas, including various other technology-related activities targeting China.

“We want to give clear guidelines on what is prohibited and what is reported separately,” the official said.

He said technological advances in the field pose a "significant risk to national security" as computers can develop sophisticated weapons and crack cryptographic codes used by intelligence agencies to protect information.

The order is part of a series of measures aimed at limiting China's access to advanced technologies, described by US national security adviser Jake Sullivan as a "small backyard, high fence" strategy.

Beijing says the US measures are aimed at limiting its technological progress. China's Ministry of Commerce expressed "serious concern" about the order on Thursday, saying it "departs from the US principles of fair competition and market economy" and that Beijing reserves the right to take action.

A second US official said the order effectively protects American security, while upholding our longstanding commitment to open investment.

The move undermines efforts to resume high-level ties that stalled after a spy balloon flew over the United States earlier this year. Biden and President Xi Jinping agreed at the G20 summit in Bali in October to stabilize their relationship and prevent the rivalry from generating conflicting information.

The United States is working with its allies to build as much consensus as possible on the importance of limiting investment in China. But those efforts are complicated by US moves that go too far and, in some cases, by domestic legal restrictions and concerns from other countries.

US officials have expressed the hope that some countries will act if Washington goes ahead. But even some close allies seem skeptical. Japanese officials have made it clear that Tokyo has no plans to review laws governing Chinese foreign investment.

But US officials have said Britain and Germany, as well as the European Union Commission, are interested in setting up a similar exemption system.

Republicans have criticized the lack of a broader investigation. "It's not half measures," said Nikki Haley, one of the Republican presidential candidates.

“We need to stop all US investment in critical Chinese technology and military companies, among others, to stop funding China's military,” he said.

The first official government wants to focus on the areas most critical to modernizing China's military and intelligence capabilities.

Another US official said the administration is targeting private equity and venture capital because it can identify Chinese conglomerate companies and other technology experts. "What we're trying to achieve here is an intangible benefit," the official said. "Ultimately, China doesn't want our money."

Emily Kilcreth, a technology expert at the CNAS think tank, said it was a "good first step to de-risking" China, but "it will make a lot of camps unhappy." Some have criticized it for not being more comprehensive, but say the time it takes to issue a final order leaves room for change.

"There will be continued efforts to enforce stricter restrictions and narrow the scope of covered technology," Kilcrets said.

Additional reporting by Will Langley in Hong Kong

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