Out of Bounds
When US President Joseph Biden signed an executive order this August on restricting outbound investments in advanced technologies to China it was both extraordinary and largely inconsequential move. In a new article for The Wire Chine, DIIS senior researcher, Luke Patey, unpacks the proposed foreign investment restrictions put forward by the Biden Administration and discusses the possible implications for US and foreign business in China from these new measures.
President Biden’s executive order represented a notable step away from America’s devotion to open trade and investment principles. But it is also narrow in scope and only targets subsectors in semiconductors, artificial intelligence and quantum computing that are critical for military, intelligence, surveillance or cyber-enabled capabilities. Moreover, unlike the hard-and-fast October 7th export controls that clamped down on U.S. semiconductor trade with China last year, the executive order on outbound investment only directs the Department of the Treasury to propose rulemaking. In other words, the particulars of the notification and prohibition program are far from set. At the earliest, the final rules will come into effect at some point in 2024.
The twists and turns of Washington’s debate on outbound investment rules reveals an America in self-examination. Who wins and who loses from the potential restrictions depends on where one stands in America’s deep and complex economic relationship with China as well as how one perceives the national interest is best served.
If the budding regime wilts away over time, then the power of business interest groups in Washington, coupled with voices of engagement in the Biden administration, will have won a victory over supposed steadfast, bipartisan commitment to confronting China as a peer rival.
Yet if the Treasury Department plows ahead on a strong foundation laid by congressional legislation, it will be another step away from Washington’s laissez-faire policy adherence and a signal that national interests are not always aligned with those of the business community.
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