US President Joe Biden is targeting China amid major tensions and seeking to regulate certain US investments. Biden issued a corresponding decree with the aim of protecting sensitive technologies.

Washington accuses Beijing of exploiting US investments to develop its military capabilities. “We want to prevent China from acquiring and using the most advanced technologies to advance military modernization and undermine US national security,” a US government official said. The relationship between the USA and China has long been tense, including economically.

Decree aimed at “questionable countries”

The government representative made it clear that this was a measure to protect national security and not a brake on investment. According to the US government, the following sectors are affected: semiconductors, certain artificial intelligence systems and quantum information technologies. The latter enable the calculation of algorithms that are too complex for today’s computers. US investments in such sectors in China could be banned by the government in the future after examination. There should be a reporting requirement for certain investments.

The decree is aimed at “questionable countries” – although only China is expressly mentioned. The core issue is to ensure that capital from the United States does not flow into industrial sectors of rival countries on a large scale that are important to the national security of the United States – for example in the defense or technology sectors.

They want to prevent China from acquiring knowledge of the most advanced technologies and then using it to advance military modernization and undermine US national security, the US official said. The aim is also that existing export controls would not be undermined. It’s not about preventing money from flowing to China. “China doesn’t need our money. (…) What they don’t have is knowledge.” The deal follows a similar mechanism whereby certain large foreign investments in the US in sensitive areas are pre-screened.

Economic consequences for the USA still unclear

A regulation of foreign investments has been discussed in the USA for some time. However, there was some controversy over whether additional restrictions could harm the US economically – especially if the Americans decide to take such a step on their own. At the most recent summit of the G7 countries in May in Hiroshima, Japan, the USA and its partners also discussed the topic, but only made very vague agreements on it. In a joint statement, the G7 countries agreed “to take further measures where necessary” to prevent the outflow of sensitive technologies.

However, the G7 countries did not make any concrete commitments. Biden’s National Security Advisor Jake Sullivan had stressed that each country must decide for itself how to approach this issue. The US government representative now emphasized: “Some allies such as the European Commission, the United Kingdom and Germany have announced that they will examine the development of their own similar programs.”

relationships severely strained

US-China relations have been at rock bottom for some time. Biden left in place the punitive tariffs against China introduced by his predecessor Donald Trump. The Democrat also initiated large-scale investments in the US to make America’s supply chains more independent – especially from China. The US also imposed export restrictions to deny China access to US technology. China’s backing for Russia’s war in Ukraine and threats against Taiwan are also causing controversy.

The USA and China are the two largest economies in the world – and as such are also closely intertwined. China is one of the US’s three largest trading partners, along with its direct neighbors Canada and Mexico.