Restricting Chinese Investments: Biden’s Strategic Move to Curb Military Influence

**President Biden Signs Executive Order to Regulate High-Tech Investments in China**

President Joe Biden has signed an executive order aimed at blocking and regulating high-tech investments in China. The move is seen as a reflection of the intensifying competition between the United States and China, as well as a response to national security concerns. The executive order specifically covers advanced computer chips, microelectronics, quantum information technologies, and artificial intelligence. Its goal is to prevent China from using U.S. investments in technology companies to enhance its military capabilities while maintaining trade relations. The Chinese Ministry of Commerce has expressed its concerns about the order and stated that it reserves the right to take measures in response.

**United States and China Engaged in Geopolitical Competition**

The United States and China are increasingly locked in a geopolitical competition that highlights their conflicting values. While the Biden administration has claimed not to seek a complete separation from China, it has imposed limits on the export of advanced computer chips and maintained tariffs implemented by former President Donald Trump. In response, China has accused the U.S. of attempting to decouple and break supply chains under the pretense of risk reduction. China has also cracked down on foreign companies operating within its borders. President Biden, however, has suggested that China’s economy is struggling and its global ambitions have been tempered, citing the U.S.’s strengthened alliances with Japan, South Korea, Australia, and the European Union. The executive order was developed in consultation with allies and industry representatives.

**Order Aims to Safeguard National Security**

Senior administration officials have emphasized that the executive order is primarily motivated by national security goals rather than economic interests. Its focus is narrow, targeting specific technology sectors rather than disrupting China’s economy. The order seeks to prevent China from exploiting U.S. investments to support the development of weapons and modernize its military. The Treasury Department will oversee the proposed rulemaking, which includes definitions and a public comment process. Investors will be required to notify the U.S. government about certain transactions with China, with prohibitions placed on some investments. The order particularly addresses private equity, venture capital, and joint partnerships that could provide China with additional knowledge and military capabilities. Lawyers and former Treasury officials anticipate the order to evolve and broaden over time.

**Bipartisan Support for Restrictions on China**

There is bipartisan support for imposing restrictions on China. The Senate voted 91-6 in favor of adding requirements to monitor and limit investments in countries of concern, including China, to the National Defense Authorization Act. However, some voices have called for even stronger measures. Representative Raja Krishnamoorthi stated that the executive order is a step forward but not the final step. Republican presidential candidate Nikki Haley, a former U.S. ambassador to the United Nations, argued for a complete cessation of U.S. investment in China’s critical technology and military companies.

**Challenging China’s Coercive Actions**

President Biden has referred to Chinese President Xi Jinping as a “dictator” following the shooting down of a spy balloon from China that entered U.S. airspace. He has also criticized China’s coercive approach to Taiwan’s independence. While China has supported Russia after its invasion of Ukraine, there has been no shipment of weapons between the two nations.

**The Impact on Global Industrial and Supply Chains**

The U.S. Chamber of Commerce has held meetings with the White House and federal agencies during the development of the executive order. The Chamber aims to ensure that the measure is targeted and administrable. Its impact on financial markets remains uncertain, but it could be seen as either a tapered step or an escalation of tensions during a delicate period. China’s Ministry of Commerce issued a statement expressing its disagreement with the executive order, claiming it disrupts the global industrial and supply chains while deviating from market economy and fair competition principles. China’s economy has experienced a decline in consumer prices, signaling a lack of consumer demand. Foreign direct investment into China has also decreased significantly, leading to concerns among foreign businesses. These companies have lost confidence in China due to tighter security controls and a lack of progress on promised reforms. The calls for economic self-reliance by Chinese leaders have further contributed to uncertainty about the future of foreign investment in the country.

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