Citing national security, Joe Biden’s administration is considering tighter rules on investments into China. Read why this is likely to focus on investments in three “force-multiplying” technologies: Illustration: KAL
When Mr Biden’s executive order does appear, it is likely to focus on investments in three “force-multiplying” technologies: advanced semiconductors, artificial intelligence and quantum computing. The exact permutation of prohibitions and notification requirements remains unclear, but the rules will affect only a sliver of American investments in Chinese firms, which were worth more than $1trn at the end of 2021.
Placing limits on America’s globetrotting investors comes with risks. One is writing over-broad rules which limit capital flows and burden investors without good reason. Paul Rosen, a Treasury official, said in May that the rules would focus on “investment dollars that come with know-how and expertise”. European leaders say restrictions are needed to prevent “know-how leaking”. But figuring out what sorts of investment are leaky is tricky.
Though Mr Biden’s initial policy on outbound investment is expected to be narrower than anything that could be called a “reverse-”, there is no shortage of hawks outside the White House who imagine outbound-investment screening as a tool for industrial policy. In 2021 a bipartisan group of congressmen introduced a bill to screen outbound investment broad enough to have affected more than 40% of American investment in China, according to Rhodium Group.
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