On August 9 President Biden issued an Executive Order (E.O.) focused on national security threats stemming from U.S. investments in the People's Republic of China (PRC), specifically those related to technologies critical for military and intelligence capabilities.
The Department of the Treasury will oversee a new national security program's implementation and concurrently issued an Advance Notice of Proposed Rulemaking (ANPRM) to outline the intended scope and solicit public input. Treasury's Investment Security office is responsible for the implementation as well as Chair of the Committee on Foreign Investment in the United States ("CFIUS").
The E.O. aims to protect U.S. national security while maintaining open investment. It sets forth a new program, focusing on prohibiting certain U.S. transactions and requiring notifications to Treasury regarding others, specifically related to the following technology areas:
The program aims to prevent the PRC from utilizing U.S. investments to further its military modernization capabilities.
Alongside the E.O., Treasury issued an ANPRM to provide clarity about the program and seek public feedback on its implementation. The ANPRM outlines preliminary considerations for the program, such as:
The ANPRM is an initial step and will be followed by draft regulations later in the process.
Beijing blasted President Biden’s decision to curb US investments in Chinese advanced technology companies, calling it blatant economic coercion.
“Restricting US companies’ investments in China with national security as a front is a clear act of overstretching the concept of security and politicizing business engagement,” according to a statement from China’s Ministry of Foreign Affairs.
“The move’s real aim is to deprive China of its right to develop and selfishly pursue US supremacy at the expense of others,” it continued.
“This is blatant economic coercion and tech bullying, an act that seriously violates the principles of market economy and fair competition, undermines the international economic and trading order, destabilizes global industrial and supply chains and hurts the interests of both China and the US and the global business community. This is de-globalization and a move to phase China out.”
“President Biden committed to not seeking to “decouple” from China or halt China’s economic development,” according to the statement.
“We urge the US to follow through on that commitment, stop politicizing, instrumentalizing and weaponizing tech and trade issues, immediately cancel the wrong decisions, remove the restrictions on investments in China and create an enabling environment for China-US business cooperation. China will follow the developments closely and resolutely safeguard our rights and interests.
Key Congressional lawmakers called the executive order a step in the right direction, but vowed to pass legislation that further restricts US investment in China. Both the House and Senate included restrictions on US outbound investment in China in their versions of the National Defense Authorization Act.
The executive order provides an important new tool, Democratic Reps. Rosa Delauro (Conn) and Bill Pascrell (NJ) said in a joint statement. “We urge the Administration to go further and will fight in Congress for broader statutory authority to become law,” they said.
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