US President Biden’s Executive Order on Chinese Tech Restrictions Draws Limited Response
Last week, US President Biden signed an executive order prohibiting US capital investment in certain sensitive technology fields in China, causing widespread attention around the world. The executive order targets China’s semiconductors and microelectronics, quantum technology, and artificial intelligence sectors, citing their connection to military and security areas. However, what surprises observers is China’s relatively tempered response, lacking a strong counterattack and minimal duration.
This phenomenon is worth observing, as it suggests that from an economic and trade perspective, Biden’s executive order may have limited impact on China-US bilateral relations, or at least, the consequences will not be as severe.
One key observation is that the scope of Biden’s executive order is narrow, primarily focusing on high-tech fields related to national security. This means that the US will closely monitor these areas while still allowing numerous other fields to remain open to China. This situation objectively benefits both China and the US.
According to reports, the executive order officially sets the stage for formulating rules that prohibit US companies from investing in “countries of concern” involved in quantum computing, advanced semiconductors, artificial intelligence, and other fields. These rules are expected to exclude portfolio investments, where companies passively invest in firms through the stock market, while actively targeting private equity, venture capital, and other investment types. The rules are scheduled to enter a public consultation phase, which will bring further clarity on which investments will be restricted. However, the rules will likely not go into effect for several months, and China’s corresponding rules will not be established until next year.
Meanwhile, US Treasury Secretary Janet Yellen’s efforts to ease tensions during her July visit to China shed light on the intention behind these restrictive measures. Yellen clarified that these measures are a “national security action, not an economic action,” reaffirming the US commitment to remaining open for investment.
Experts have noted that the announced restrictions are narrower than initially anticipated. Sarah Bauerle Danzman, a senior fellow at the Atlantic Council, highlighted this point. However, Danzman also warned that some technologies covered by the ban are poorly defined, potentially resulting in overly broad restrictions that could harm US interests by raising costs for businesses and isolating the country from technological progress.
The true impact of Biden’s executive order on China lies in the spillover effect. Will other countries, including US allies, follow suit? As of now, the spillover effect seems unlikely to expand.
The European Union, for example, stated that it will not immediately adopt the US investment restriction order on China’s cutting-edge technology fields. The EU plans to present its opinions before the end of the year, emphasizing the need for a reasonable assessment to avoid significant industry impacts. France and Germany, in particular, are attempting to delicately balance maintaining economic relations with China and taking a strong stance on key technologies.
Germany, with its close economic ties to China, has expressed skepticism towards US investment restrictions. The German wholesale and foreign trade association predicts that German companies will proceed cautiously, considering their cooperation and links with US partners in sensitive high-tech sectors. German companies fear potential US sanctions if doubts arise.
The European Chamber of Commerce noted that the German government’s ability to restrict German companies investing in China or developing economic and trade relations with China is limited, especially for large companies. As long as German companies in China are willing to continue their operations, the German government faces difficulties in imposing restrictions.
In conclusion, the consequences of the US clearly defining the scope of restrictions on China are limited to narrowing the blockade and preserving the overall direction of Sino-US economic and trade relations. The key factor remains the spillover effect, as other countries’ responses will determine the ultimate impact of Biden’s executive order on China.