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New Executive Order Will Trigger Restrictive American Investments In China

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By Augustine Mbam - - 5 Mins Read

The Executive Order By The White House Hopes To Achieve Transparency In Investment Deals

President Joe Biden is working on an executive order to help America regulate its investments in China and ensure translucency in every of America's major deals with China. An official order issuance by late March or early April seems likely.

Although the order excludes investment in the advanced Chinese semiconductor industry, other aspects of China's economy will still benefit from the cash flow. To achieve the transparency it sets out, every U.S. firm is now mandated to involve federal authorities in their plans to deal with China's tech industries. Quantum computing and Artificial Intelligence have been approved, while possibilities of investments in other aspects are still being reviewed.

New Order Is An Upgrade From Previous Policies

Last year, President Biden considered a couple of investment policies with Congress, and this new executive order seems to be a modest option.

Biden addressing congress (Getty)

Policymakers had been swift to propose a review in government laws that prevents the U.S. from investing in major aspects of China's industry like microchips, AI, Quantum Computing, clean energy, and biotechnology after they assumed China poses a threat to National security.

Now that things are beginning to take a different turn, efforts made by some China intel in the White House to weaken Beijing's high-tech industry will be met with resistance after this order takes effect because strong economic interest between both countries continues to foster interrelations.

This would indicate the beginning of more supervision of American businesses overseas by Federal authorities. The U.S. government has always allowed inter-deals with China. Still, with an increase in China's use of U.S. funding to improve and build high-end technology and defense systems, it is expedient for proper scrutiny of subsequent "outbound investments" even if China's technological innovation appears to be less aggressive. 

The M.D. at D.C. consulting firm Beacon Global Strategies, Eric Sayers, explained that the initial screening process on these investments took years before it could make any effective impact. However, with the new order, one can expect an array of laws to instill the needed order.

“This will likely be an additive process that grows over time through both executive powers and legislative action,” Sayers said.

A Setback To National Security?

 While the order is still under consideration, it is expedient to note it's likely to affect National security if approved. National security leaders in the White House have begun to demand a more intense approach if the order must be followed. 

The administration would have to develop a pilot program that monitors subsequent deals between U.S. firms and Chinese Artificial Intelligence to ensure likely threats to national security are quickly curtailed. Other industries like biotech and clean energy can also be pending until the country better supervises major investment deals. 

In a speech last September, the national security adviser Jake Sullivan said that the administration would work on weakening Chinese development across several sectors; AI, quantum, chips, biotech, and clean energy, which were included in the executive order discussions.

Recent surveillance over the spy balloon incident has narrowed the administration's approach to requests of the Treasury Department to use a more aggressive approach with outbound investments. Meetings have been ongoing with U.S. financial firms since late last year. Republicans in the White House want a narrower approach that commits leaders of the House Financial Services Committee to make laws that empower the government to blacklist Chinese firms if the need arises.

The debate will be conducted at the Senate, and all Banking Committee will grant a hearing on sanctions, export controls, and “other tools” like outbound investment screening this Tuesday.