Biden limits China investments, cites ‘National security threats’

In a move that could rankle Beijing, the Biden administration is planning to issue new restrictions on American investments in certain advanced industries in China to protect ‘national security threats’, New York Times reported on Wednesday citing people familiar with the deliberations.
This measure would be one of the first significant steps by the US amid an economic clash with China to clamp down on outgoing financial flows. It could also set the stage for more restrictions on investments between the two countries in the years to come. According to NYT, the restrictions would bar private equity and venture capital firms from making investments in certain high-tech sectors, like quantum computing, artificial intelligence and advanced semiconductors, in a bid to stop the transfer of American dollars and expertise to China.
The measure would further require the firms making investments in a broader range of Chinese industries to report that activity, giving the government better visibility into financial exchanges between the US and China. Although, the White House declined to comment, as per NYT. Biden officials have emphasised that outright restrictions on investment would narrowly target a few sectors that could aid the Chinese military or surveillance state as they seek to combat security threats but not disrupt legitimate business with China.Notably, the Biden administration has recently sought to calm relations with China, dispatching Treasury Secretary Janet L Yellen and other top officials to talk with Chinese counterparts. Even in recent speeches, Biden officials have argued that targeted actions taken against China are aimed purely at “protecting US national security”, not at damaging the Chinese economy.
At the same time, the Biden administration has continued to push to “de-risk” critical supply chains by developing suppliers outside China, and it has steadily ramped up its restrictions on selling certain technologies to China, including semiconductors for advanced computing, New York Times reported.
But beyond screening Chinese investment into the United States for security risks, Washington has left financial flows between the world’s two largest economies largely untouched. Just a few years ago, American policymakers were working to open up Chinese financial markets for US firms.
The investments between the US and China have fallen sharply in the past few years, as the countries severed other economic ties. But venture capital and private equity firms have continued to seek out lucrative opportunities for partnerships, as a way to gain access to China’s vibrant tech industry, NYT reported. However, the planned measure has already faced criticism from some congressional Republicans and others who say it has taken too long and does not go far enough to limit US funding of Chinese technology.

BIDEN REASONS TO IMPLEMENT INVESTMENT RESTRICTIONS

• National Security : Preventing transfer of advanced technologies with potential military or surveillance applications.
• Countering Rivalry : Limiting China’s access to sensitive tech to curtail its military capabilities.
• Mitigating Espionage : Reducing economic espionage risks and protecting intellectual property.
• Supply Chain Resilience : Safeguarding critical supply chains from potential manipulation.
• Alliance Alignment : Demonstrating solidarity with allies’ concerns over China’s tech advancements.
• Dual-Use Prevention : Preventing dual-use technologies from aiding China’s military goals.