Amid growing technology race, Biden admin prepares new rules for US investment in China

According to The Wall Street Journal, US President Joe Biden-led US government is developing a new programme that may prevent American investments in specific sectors in China. This move by the Biden administration is a fresh measure to protect the United States' technological edge in an escalating rivalry between the two countries.

On Friday, the US Treasury and Commerce departments submitted reports to lawmakers on Capitol Hill, which stated that they are contemplating the implementation of a new regulatory framework to deal with American investment in advanced technologies overseas that may pose a threat to national security. The Wall Street Journal viewed copies of the reports.

The reports indicate that the US government may prohibit certain investments while also gathering information about other investments to guide future actions. The reports did not specify which technology sectors the Biden administration considers risky. However, the reports noted that industries that could bolster the military capabilities of adversaries would be a key focus of the program, according to WSJ.

Individuals familiar with the programme anticipate that it will encompass private equity and venture capital investments in advanced semiconductors, quantum computing, and specific types of artificial intelligence. The aim is to prevent American investors from offering funding and expertise to Chinese firms that may enhance the speed and precision of Beijing's military decision-making.

The US Treasury department report states that the programme would concentrate on "safeguarding US capital and expertise from being leveraged in manners that jeopardise our national security without imposing an excessive burden on American investors and businesses", according to the news report.

The reports did not identify the countries that would fall under the purview of the new regulations. Nonetheless, individuals familiar with the issue anticipate that the Biden administration's efforts to establish the new rules would predominantly pertain to American investments in China.

The US Treasury and Commerce departments stated in the report that they anticipate finalizing their policy on the matter shortly. The two departments also revealed that they plan to request additional resources for the investment program in the White House budget, which is set to be released next week, as reported in the news.

The reports noted that the new programme will undergo a public comment period, and the Treasury Department will oversee it in collaboration with the Commerce Department. The regulations governing American investment in foreign countries will form part of a more comprehensive initiative by the Biden administration to limit China's capacity to develop technologies that American officials believe could endanger national security.

Last year, in 2022, the US government declared export constraints on advanced semiconductors and chip-manufacturing equipment to impede China's military progress. According to individuals familiar with the situation, the US government has been labouring on an executive order to establish the new investment regulations for several months, as reported by The Wall Street Journal.

During a recent public event, US Deputy Treasury Secretary Wally Adeyemo stated that Washington ought to establish investment programme regulations to tackle national security risks and avoid creating an inequitable economic advantage.