(USNewsMag.com) – U.S.-based investors will have to find other places to put their money as President Joe Biden recently imposed an executive order that bans U.S. entities from investing in several key industries in China, citing concerns regarding national security.
Quantum information technologies, semiconductors and microelectronics, and a number of artificial intelligence systems are off-limits to American investors. In a statement, the U.S. Treasury Department said that the government is simply “protecting technologies that are critical to the next generation of military innovation.” There are concerns that the Chinese could develop technologies using U.S. money to further their own military capabilities, which could in turn pose a threat to national security.
A senior government official told CNN that, at the end of the day, “China doesn’t need our money.” What the U.S. government is trying to restrict, he said, is access to “intangibles” such as the know-how and expertise that come from industry experts, which often accompany investments.
The Biden administration was quick to state that national security was the primary reason behind the order and that it had no intention of harming the Chinese economy. The U.S. previously committed to avoiding a “decoupling” with China, and the order, according to the government, is only a “de-risking” measure.
Senate Democratic Leader Chuck Schumer doubled down on the government’s reasoning, saying that U.S. private investment has long fueled Chinese military growth.
The investment prohibition covers venture capital, joint ventures, private equity, and greenfield investment firms and only bans future investments. However, the Treasury Department can ask firms for records of their previous investments.
Even before the order, investments from U.S. companies in the tech sector in China had been on the decline, according to data from global capital market research firm Pitchbook. Investments from venture capital in the sector last year were $9.7 billion, a steep fall from $32.9 billion worth of investments in 2021. This year, investments are expected to fall even further, with venture capital putting in around $1.2 billion in Chinese tech so far.
As expected, the Chinese government has slammed the prohibition, saying that it was “strongly dissatisfied” with the action and accusing the U.S. of “artificially hindering global economic and trade exchanges” and standing in the way of the “recovery of the world economy.”
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