Biden announces curbs on US investments in China

WASHINGTON, Aug 10 (AFP): US President Joe Biden on Wednesday issued an executive order aimed at restricting certain American investments in sensitive high-tech areas in China-a move that could further strain ties between the world's top two economies.

The long-anticipated rules, expected to be implemented next year, target sectors like semiconductors and artificial intelligence, as Washington seeks to limit access to key technologies.

"The commitment of the United States to open investment is a cornerstone of our economic policy and provides the United States with substantial benefits," Biden said in a letter to Congressional leaders announcing the executive order.

"However, certain United States investments may accelerate and increase the success of the development of sensitive technologies and products in countries that develop them to counter United States and allied capabilities."

The program is set to prohibit new private equity, venture capital and joint ventures investments in advanced semiconductors and some quantum information technologies in China, according to the Treasury Department.

"The outbound investment program will fill a critical gap in the United States' national security toolkit," a senior government official said on condition of anonymity.

"What we're talking about is a narrow and thoughtful approach as we seek to prevent (China) from obtaining and using the most advanced technologies to promote military modernization and undermining US national security."

The Treasury is considering a notification requirement for US investments in Chinese entities involved in less advanced semiconductors, and activities relating to certain types of artificial intelligence.

China could exploit US investments to further its ability to produce sensitive technologies critical to military modernisation, the Treasury Department said.

But it anticipates creating an exception for certain US investments into publicly traded securities and transfers from US parents to subsidiaries.

A spokesman for China's Ministry of Commerce said Biden's executive order "seriously deviates from the market economy and fair competition principles the US has always promoted and ... damages the international trade order, and severely disrupts the security of global industrial and supply chains."

While the volume of dollars or numbers of transactions covered by a ban or notification regime are likely to be quite small, it does not necessarily mean the overall impact will be limited, said Emily Benson, director of the Project on Trade and Technology at the Centre for Strategic and International Studies (CSIS).

"It's possible that while they're not directly subject to bans, companies will rethink the nature of their investments and that could have a chilling effect on bilateral investment over time," Benson told AFP.

The latest restrictions come shortly after visits by several high-level US officials to China as Washington and Beijing aim to stabilize ties.

During Treasury Secretary Janet Yellen's trip to the Chinese capital last month, officials from both sides talked about what such curbs might look like, and she told reporters that any new moves would be implemented in a transparent way.