Chips, quantum IT, AI – Biden restricts high-tech deals with China

The situation will be closely monitored and “one’s own rights and interests will be resolutely defended,” China’s state broadcaster CCTV was quoted as saying on Thursday by a foreign ministry spokesman in Beijing. The real goal of the Americans is to deprive China of its development rights and to maintain US global hegemony. Washington’s actions also violate market economy principles and fair competition and undermine the international economic and trade order, the spokesman continued.

Fear of military modernization
A US government official previously said it would “want to prevent China from acquiring and using the most advanced technologies to advance military modernization and undermine US national security”. He made it clear that it was a measure to protect national security and not a brake on investment.

According to the US government, the following industries are affected: semiconductors, certain artificial intelligence systems and quantum computers. The latter make it possible to calculate algorithms that are too complex for today’s computers. U.S. investment in such sectors in China could be banned by the government in the future after investigation. There should be a reporting obligation for certain investments.

Decree against “doubtful countries”
The decree is directed at “questionable countries” – but only China is explicitly mentioned. The point is to ensure that capital from the United States does not end up on a large scale in industrial sectors of rival countries that are important to the national security of the United States – for example, in the defense or technology sector.

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

The US has been talking about regulating foreign investment for some time now. However, there has been some controversy over whether additional restrictions could hurt the US economically – especially if Americans decide to take such a step themselves. At the most recent summit of the G7 countries in May in Hiroshima, Japan, the US and its partners also discussed the subject, but made only very vague agreements on it. In a joint statement, the G7 countries agreed to “take further action where necessary” to prevent the outflow of sensitive technologies.

US allies are examining their own measures
However, the G7 countries have not made any concrete commitments. The US government representative now emphasized: “Some allies such as the European Commission, the United Kingdom and Germany have announced that they will explore the development of their own similar programs.”

Relations between the US and China have been at an all time low for some time. Biden left the punitive tariffs against China introduced by his predecessor Donald Trump in place. 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 support for Russia’s war in Ukraine and threats against Taiwan are also controversial.

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