New episode in the crowded skies of US-China relations. US President Joe Biden was due to sign an executive order on Wednesday restricting direct investment by investment funds in three sensitive technologies in China: semiconductors, quantum computing and artificial intelligence. In concrete terms, most of the investments covered by the decree will have to be notified to the administration. And certain transactions may therefore be prohibited.
The text thus completes the measures already taken by Washington in the standoff between it and Beijing, after a strengthening of the control of exports of sensitive materials. The stated objective is not to help China modernize itself militarily and thus threaten the security of the United States.
The White House is sometimes on a ridge line. For months, Washington has been repeating that the confrontation is more strategic than economic, as Treasury Secretary Janet Yellen argued in April. “These are tailor-made provisions” and “not, as Beijing says, a technological blockade”, also assured National Security Advisor Jake Sullivan at the same time.
Decline in investments
US direct investment in China already hit a 20-year low last year, at $8.2 billion, according to Rhodium Group. “This should remain a limited scope and it is therefore a partly symbolic measure,” said Mary Lovely, senior fellow at the Peterson Institute for International Economics (PIIE). “China was probably interested in the expertise brought by these ‘venture capital’ and ‘private equity’ companies, but it can replace that. The decree should also not immediately come into force. It would provide for a period of consultation in order to take into account the remarks of the actors of the sector before being finalized.
The debate on the concrete application of the measures is also open. In late July, the House of Representatives select committee on “strategic competition between the United States and the Chinese Communist Party” asked the Biden administration to strengthen its rules made in October last year.
Harm American interests
“Since the publication of this rule, CCP technology companies and other multinational entities have found solutions to circumvent export control rules,” which allows China “to continue to have legal access to semi- advanced drivers to effectively train artificial intelligence models”, criticize the two deputies at the head of the committee.
Conversely, American chipmakers recently warned the White House against an overly restrictive policy, judging that it would end up harming American economic interests. At the beginning of the year, the White House had already thrown all its weight into the balance to convince Japan and the Netherlands, two major countries for semiconductor equipment, to more strictly control their exports of sensitive equipment to China.
Washington also controls Chinese investors wishing to make acquisitions in the United States. In its latest annual report, the CFIUS, responsible for foiling the most sensitive takeovers for national security, noted a drop in the number of acquisitions by Chinese investors.
2023-08-09 17:24:01
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