What are Biden's considerations for signing this "unprecedented" law? How does it affect geometry?, Depth | Restrictions on Investment in China US Relations | Restrictions on Investment in China | Biden

On the 9th local time in the United States, rumors spread that months of US investment restrictions on China had been implemented. On the same day, US President Biden signed an executive order restricting new investments in sensitive technologies such as semiconductors, quantum computing, and artificial intelligence in China.

This executive order, which will take effect in 2024, has been described by US media as an unprecedented investment restriction rule against China. In what context was it introduced? What are the characteristics? What impact will it bring to China and Sino US relations?

Using "national security" as a pretext again

Biden continued to use the familiar rhetoric of "US national security" when signing the new executive order.

According to the executive order, advances in sensitive technologies and products that are crucial for military, intelligence, surveillance, or cyber capabilities by the "relevant countries" pose a threat to US national security, and certain US investments pose a risk of exacerbating such threats.

The executive order will authorize the US Treasury Secretary to prohibit or restrict certain investments by the US in Chinese entities in fields such as semiconductors, quantum computing, and artificial intelligence. US investors also need to inform the Treasury of other transactions that may involve national security.

According to the administrative order, these restrictions apply to direct investment forms such as private equity, venture capital, joint ventures, and Greenfield investments. The Wall Street Journal reported that investors who violate these rules may face fines and be forced to divest their shares.

It is expected that the administrative order will be implemented next year after multiple rounds of public evaluation.

A senior US official told CNN that the executive order not only involves investment in China, but more importantly, restricts China's access to "intangible assets," such as technical know-how or relationships with experts, often accompanied by investments from venture capital or private equity firms.

According to American media, the executive order has been brewing for nearly two years. Meanwhile, venture capital firms and the technology industry have lobbied the Biden administration to narrow the scope of the order, fearing that the White House will impose comprehensive restrictions on US investment. Ultimately, the executive order protected US security in a narrow range of categories while maintaining a long-term commitment to open investment.

Some analysts point out that although the US media vigorously portrays "investment restrictions on China in only three areas", this cannot change the essence of the US's unreasonable suppression of China.

The Chinese Ministry of Foreign Affairs has stated that the United States, under the guise of national security, is restricting American companies from investing in China and promoting a pan security and pan politicization approach. Its true purpose is to deprive China of its right to development, maintain its own hegemony and self-interest, and is a blatant economic coercion and technological bullying. The Chinese Ministry of Commerce stated that China is seriously concerned about this and reserves the right to take measures.

Not conducive to the interests of the United States itself

Speaking of the background of the administrative order, Wu Xinbo, Dean of the Institute of International Studies at Fudan University, stated that since Biden took office, technology suppression has been the main means of containment against China. Last October, the United States announced export restrictions on chips and their manufacturing equipment supplied to China, but now it is focusing on a broader high-tech field.

Wu Xinbo said that the Biden administration's move is under the guise of "US national security", but the real reason is that semiconductors, artificial intelligence, and quantum computing are at the forefront of global technological development, and are also the key for China to climb up the global industrial chain value chain. The United States hopes to maintain its leading position in these fields and expand the technological gap with China as much as possible, thus intending to strengthen its containment of important technological fields in China.

In Wu Xinbo's view, the reason why administrative orders are called "unprecedented" is that their coverage areas have expanded. If the restriction policy in October last year focused on semiconductors and chips, now it extends to artificial intelligence and quantum computing. Secondly, the previous crackdown mainly targeted technology, products, equipment, and personnel. This time, the United States has issued an administrative order for the first time to restrict investment in China.

After the administrative order is issued, the public is generally concerned about its impact.

Wu Xinbo believes that for China, US investment in related fields may decrease, and US companies will adopt a more cautious attitude towards cooperation with China, which may to some extent exacerbate the decoupling of US technology from China.

"In addition, administrative orders are not only related to investment issues, but also have a linkage effect, affecting other aspects of Sino US cooperation," said Wu Xinbo.

The New York Times believes that as geopolitical tensions intensify, US venture capital investment in China has reached a low point. "It is currently unclear how much funding will be affected by the new administrative order, but it may have a 'cold cicada effect' on investments outside specific industries."

Some analysts believe that the US restrictions will only force Chinese technology companies to strengthen independent innovation. Victor Shi, Associate Professor of Political Science at the University of California, San Diego, believes that the US restrictions will promote the growth and development of domestic semiconductor companies in China, as Chinese companies will instead purchase domestic chips, allowing local companies to gain greater market share.

Wu Xinbo said that for the United States itself, the negative effects of administrative orders will also become apparent.

In his view, in the past, American technology companies investing in China was one of their main profit points. These companies valued the Chinese market and the profits gained from investment helped American technology companies reinvest in research and development. Now, administrative orders will compress the profit margins of American companies, which is detrimental to the competitiveness of the United States.

The American Semiconductor Association issued a statement in July warning that the Biden administration's restrictive policies may weaken the competitiveness of the US semiconductor industry, disrupt the supply chain, and cause significant market uncertainty.

For China US relations, the issuance of administrative orders is also bad news.

Wu Xinbo pointed out that the issuance of the administrative order took a relatively long time, and China had long anticipated this. At present, China's handling of Sino US relations is aimed at promoting possible easing and improvement of the relationship, while also resolutely fighting against the interference and destruction of Sino US relations by the United States.

"China has already expressed its reservation of the right to take measures, and I believe China will make corresponding countermeasures." Wu Xinbo said, "In summary, China US relations are in a game stage of both struggle and dialogue."

The New York Times believes that in the past few years, despite a series of economic frictions between China and the United States, venture capital and private equity companies are still seeking cooperation opportunities as a way to enter China's vibrant technology industry. The new administrative order may mean opening up a new front in the economic conflict between China and the United States, undermining efforts to restart high-level contacts between the two countries.

Do other countries follow or not?

According to American media, the new executive order is only a preliminary framework and may expand over time. In addition, the United States has been working with allies to reach as much consensus as possible on the necessity of restricting investment in China.

So the question is: Will such actions by the United States escalate and drive other countries to do so?

Wu Xinbo said that the United States will observe the effectiveness of executive orders. If the effect is not significant, efforts may be increased, such as expanding the scope of restrictions. It is worth noting that some Republican lawmakers have criticized the scope of the executive order as too small and hope to include areas such as new energy and biotechnology.

Wu Xinbo added that under pressure from the United States, allies such as Europe and Japan are expected to follow the trend to a greater or lesser extent, just like the United States previously tried to persuade Japan and the Netherlands to restrict the export of semiconductor production equipment to China.

The Financial Times pointed out that this effort by the United States is complex because other countries are concerned that the United States is "going too far". Even close ally Japan is still hesitating. But US officials have revealed that currently the UK, Germany, and the European Commission have expressed interest in developing similar outward investment systems.

Analysts believe that the US's strong push for decoupling and disconnection stems from its deep-rooted Cold War mentality. However, from the fluctuating but overall trend of the development of China US economic and trade relations over the past few decades, it can be seen that the forward development of China US economic and trade relations is driven by the needs of both countries, in line with their interests, and conducive to global economic stability and development. Therefore, the overall direction will not change. The US government's containment and suppression of China's technology is not only futile, but also dangerous and unwise.