Biden administration bans investment in Chinese high tech

In the latest war of word with China, US president Joe Biden has issued a statement prohibiting investment in entities that engage in certain activities related to the development of advanced semiconductors, quantum information technologies, or AI systems.

The White House said that the Executive Order covers US investment in technologies designed for military or intelligence end-uses in countries of concern. Investment in businesses that develop less-advanced semiconductors or AI systems designed for certain dual-use capabilities that pose national security risks will also need to notify the US government.

A US government official said that among the key areas the Biden administration wants to address is the situation that occurs when investment firms provide expertise that often goes alongside funding of new business investments.

“Ultimately, China doesn’t need our money. They’re a net capital exporter. So, the thing we’re trying to prevent is not money going into China overall, because they have plenty of money. The thing they don’t have is the know-how. And the know-how is often very connected to specific types of investments.”

The US government also plans to work with the European Union and the UK on outbound investment screening. “Our goal is to have the conversations directly with the EU officials who are doing this work, but also with their member states so that we best understand, from their perspective, how to structure something that can work in unison,” the official said.

The Executive Order is the latest development in an ongoing dispute between the US and China over access to high tech. At the start of August, the Chinese Ministry of Commerce and Administration of Customs said that from August 2023, several gallium and germanium-based compounds would be subject to export restrictions to safeguard national security and interests.

While the US and China trade blows over restricting technology exports, Chinese firms have begun preparing for future restrictions. The Financial Times reported that Alibaba, Baidu, ByteDance (owned by TikTok) and Tencent have ordered $1bn of Nvidia A800 GPUs (graphics processing units).

The A800 is a version of Nvidia’s GPU made specifically for running AI workloads in the Chinese market. Following restrictions in the US preventing Nvida from selling its high-end GPUs to China, the company created a version that would comply with export restrictions. However, at the end of June, the Wall Street Journal reported that the Biden administration is looking at further restrictions of AI chips, which will ban sales of the A800 to China.