Biden aims to unveil China investment curbs by G7 May Summit

President of the US Joe Biden aims to sign an executive order in the coming weeks that will limit investment in key parts of China's economy by US businesses, people familiar with the internal deliberations said.

The administration, which has been debating the measure for almost two years, plans to take action around the time of a summit of the Group of Seven advanced economies that's due to start on May 19 in Japan. It's possible that the timing could slip, some of the people cautioned.

The US has been briefing its G-7 partners on the investment curbs for high-tech industries, and hopes to get an endorsement at that meeting, even though the other countries aren't expected to announce similar restrictions at the same time, the people said.

The move marks a new phase in the years-long economic campaign against China that's already seen the US impose tariffs on Chinese imports under ex-President Donald Trump, and more recently seek to restrict exports of key American technologies. Now, capital flows between the world's two biggest economies are in the crosshairs. 

The US says it's imposing the curbs on national security grounds – a point emphasized by Treasury Secretary Janet Yellen in a speech Thursday – rather than in an effort to hold back the development of a rival superpower, as Beijing has argued. 

Tensions have escalated since Russia's invasion of Ukraine, a conflict in which the US and China effectively find themselves on opposite sides, and there's growing concern about a new Cold War that could fracture the world economy into rival blocs.

AI and Quantum 

The executive order will cover the fields of semiconductors, artificial intelligence and quantum computing – focusing on investments where US firms play an active role in management. That includes venture capital and private equity, as well as certain forms of technology transfer and joint ventures.

Some types of investment will be barred outright, while others will require companies to notify the government. Details are set to be outlined in a set of regulations to follow the executive order, and companies will have some time to offer feedback before the order goes into effect. 

US officials say the investment limits are intended to choke off critical funding and know-how that could advance China's military capabilities.

In a speech delivered in Washington Thursday that addressed US-China economic ties, Yellen said the curbs on outbound investment will affect "specific sensitive technologies with significant national security implications."

Competitive Advantage 

"These national security actions are not designed for us to gain a competitive economic advantage, or stifle China's economic and technological modernisation," Yellen said. The US will pursue its security concerns regarding China "even when they force trade-offs with our economic interests," and will "engage and coordinate with our allies and partners" over the policies, she said.

US officials have made clear that a unilateral measure wouldn't fulfill the national security goals because investments in China by other countries could just take the place of the American ones that the administration is about to block.

Treasury Department officials this week briefed their European counterparts on the measure, and the administration has begun sharing information with business leaders too. Once the order takes effect, Treasury will be administering a one-year pilot program that could later be expanded.

A spokesman for the National Security Council declined to comment.

As China's economy took off in the past three decades, American companies plowed money in as they sought to capture a slice of the world's fastest-growing major market and lower the cost of production for supply chains.