WASHINGTON — The Biden administration is nearing completion of an executive order that would restrict investments by U.S. companies in parts of the Chinese economy, including advanced technologies that could enhance China’s military and intelligence capabilities, people familiar with the matter said.
The effort is at an advanced stage, with President Joe Biden prepared to request funding for it in his March 9 fiscal 2024 budget, according to reports to Congress obtained by Bloomberg.
The order would add to the administration’s toolkit to address concern about China’s technological advances, which includes export controls on advanced semiconductors and new guidance on screening Chinese investments in the U.S.
While working on the policies, officials discovered that U.S. investments in China often come with intangible benefits such as managerial and technical expertise that can help Chinese firms grow quickly, the people said. The restrictions are meant to capture investments in projects that have clear national-security applications, including artificial intelligence and code-breaking technologies.
U.S. companies currently face no U.S. government restrictions on investing in China’s tech sector. Some have invested in Chinese companies that are developing cutting-edge supercomputing capabilities and other technologies that can be used in military applications.
The administration is working with allies and partners to develop the program and submitted two reports to Congress on Friday outlining what it would cost to set up a so-called outbound investment program with the Treasury Department.
The broad outlines of the program, which targets certain kinds of sensitive “dual-use” technologies that can be used in both commercial and military applications, are included in the brief reports to Congress seen by Bloomberg.
While the reports don’t mention specific technologies or countries, certain kinds of advanced semiconductors, quantum computing and artificial intelligence are expected to fall within the scope of the program.
It’s “a good first step to ensure U.S. investment does not fuel the Chinese Communist Party’s capabilities and create dangerous dependencies,” Rep. Rosa DeLauro, the top Democrat on the House Appropriations Committee, said in a statement.
The program would be implemented and administered by the Department of the Treasury in coordination with the Department of Commerce, which maintains extensive lists of individuals and firms that are barred from receiving certain kinds of sensitive U.S. exports.
Broader scope
But the new program is broader in scope. Investments that would be subject to it “are of a nature that they are not presently captured by export controls, sanctions or other related authorities,” according to the reports to Congress.
Actions may include prohibiting the investments and/or seeking more information about other investments to inform future actions, one of the reports said.
“Work is ongoing to ensure clear definitions and scoping as necessary to facilitate swift implementation and achieve the objective of preventing U.S. capital and expertise from being exploited in ways that threaten U.S. national security while not placing an undue burden on U.S. investors and businesses,” the report said. “Work is also ongoing to engage with international partners and allies on the topic.”
A final version of the program is expected “in the near future” and will include an opportunity for public comment, one of the reports said.
Biden’s 2024 presidential budget request will recommend additional resources for the program, which is estimated to cost $10 million to administer in the 2023 fiscal year.
