Biden issues an executive order restricting US investments in Chinese technology

President Joe Biden signed an executive order Wednesday to block and regulate high-tech U.S.-based investments going toward China — a move the administration said was targeted but it also reflected an intensifying competition between the world’s two biggest powers.

The order covers advanced computer chips, micro electronics, quantum information technologies and artificial intelligence. Senior administration officials said that the effort stemmed from national security goals rather than economic interests, and that the categories it covered were intentionally narrow in scope. The order seeks to blunt China’s ability to use U.S. investments in its technology companies to upgrade its military while also preserving broader levels of trade that are vital for both nations’ economies.

The Chinese Ministry of Commerce responded in a statement early Thursday that it has “serious concern” about the order and “reserves the right to take measures.”

Biden has suggested that China’s economy is struggling and its global ambitions have been tempered as the U.S. has reenergized its alliances with Japan, South Korea, Australia and the European Union. The administration consulted with allies and industry in shaping the executive order.

“Worry about China, but don’t worry about China,” Biden told donors at a June fundraising event in California.

The goals of the order would be to have investors notify the U.S. government about certain types of transactions with China as well as to place prohibitions on some investments. Officials said the order is focused on areas such as private equity, venture capital and joint partnerships in which the investments could possibly give countries of concern such as China additional knowledge and military capabilities.

Biden has called Chinese President Xi Jinping a “dictator” in the aftermath of the U.S. shooting down a spy balloon from China that floated over the United States. Taiwan’s status has been a source of tension, with Biden saying that China had become coercive regarding its independence.

China has supported Russia after its 2022 invasion of Ukraine, though Biden has noted that the friendship has not extended to the shipment of weapons.

Separately, foreign direct investment into China fell 89% from a year earlier in the second quarter of this year to $4.9 billion, according to data released by the State Administration of Foreign Exchange.

Most foreign investment is believed to be brought in by Chinese companies and disguised as foreign money to get tax breaks and other benefits, according to Chinese researchers.

However, foreign business groups say global companies also are shifting investment plans to other economies.

Foreign companies have lost confidence in China following tighter security controls and a lack of action on reform promises. Calls by Xi and other leaders for more economic self-reliance have left investors uneasy about their future in the state-dominated economy.