President Biden squeezed China with an executive order on Wednesday that will ban new American investment in technologies that could undermine U.S. national security.
The order allows the Treasury Department to restrict U.S. investments in China’s semiconductor and microelectronics, quantum information technologies and artificial intelligence sectors. The Biden administration says it wants to limit U.S. investment in industries that might help advance the Chinese Communist Party’s military.
“The Biden Administration is committed to keeping America safe and defending America’s national security through appropriately protecting technologies that are critical to the next generation of military innovation,” the Treasury Department said in a statement. The administration called Biden’s order a “narrowly targeted action” that will complement existing export controls and maintain the U.S. government’s “longstanding commitment to open investment.”
Senior officials said the new program will add a “small yard, high fence” approach to address the national security threat posed by China, but Chinese officials accused the U.S. of pursuing “technology hegemony” and demanded Washington “immediately revoke its erroneous decision.”
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Washington’s “true purpose is to deprive China of its development rights and maintain its own hegemony,” China’s Foreign Ministry said.
China promised to “resolutely safeguard its own rights and interests,” the Ministry of Commerce said in a separate statement, according to the Associated Press. Beijing did not say how China might retaliate. Previous denunciations of U.S. policy by China sounded tough but were not backed by action.
The new investment restrictions complicate the Biden administration’s ongoing attempt to repair relations with China, which have deteriorated in recent years because of disputes over security, human rights, technology, Taiwan and Beijing’s treatment of Hong Kong.
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Treasury Secretary Janet Yellen visited Beijing in July and said communication would increase but announced no agreements on disputes. Chinese leaders have demanded the United States change its policies on Taiwan and other issues but have given no indication they might change trade and other policies that irk Washington and China’s Asian neighbors.
China has taken some retaliatory action against the United States. Licensing rules that took effect on Aug. 1 have restricted exports of gallium and germanium, two metal sued in computer chips and solar cells.
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Senior Biden administration officials emphasized that the president’s order is a national security action, not an economic one. The government wants “de-risking” of U.S.-China economic ties and wants to avoid “decoupling” the two economies, officials said.
Under the proposed rules, U.S. investors would be required to notify the Treasury Department about certain transactions. Other actions would be prohibited.
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The Treasury Department has issued an advanced notice of proposed rulemaking before putting Biden’s order into effect. The Biden administration said it seeks input from stakeholders before developing the details of its new regulations.
The Associated Press contributed to this report.