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Beijing — Biden’s Executive Order on U.S. Investments in Chinese Companies Raises Questions
The long-awaited executive order by the Biden administration regarding U.S. investments in Chinese companies has raised questions about its implementation. Analysts say that the 45-day public comment period provides an opportunity for U.S. investors to influence the final regulation.
Outline of the Executive Order
The executive order signed by President Joe Biden aims to restrict U.S. investments into Chinese semiconductor, quantum computing, and artificial intelligence companies due to national security concerns. The Treasury Secretary, Janet Yellen, is responsible for determining the details, and the Department of Treasury has published a fact sheet and an “Advance Notice of Proposed Rulemaking,” seeking more information through specific questions.
What’s Covered?
The executive order does not explicitly prohibit U.S. investments into Chinese businesses, but it highlights the sectors of concern. These sectors include semiconductors, quantum computing, and artificial intelligence. The U.S. government is primarily focused on tech that has military implications and could compromise national security.
What’s Banned and What’s Allowed?
The executive order potentially bans various U.S. transactions, such as equity acquisitions, greenfield investments, joint ventures, and certain debt financing transactions involving these sectors of concern. However, certain kinds of investments, such as university research collaborations, intellectual property licensing, and bank lending, are expected to be excluded from the forthcoming regulations.
Public Consultations and Comments
The Treasury Department is seeking written comments on its advanced notice from the public until September 28. The notice includes requests for data on investment trends and questions about threshold requirements and resulting burdens for U.S. investors. Public comments will be essential in shaping the final scope and regulations related to the executive order.
Implications and Future Outlook
The forthcoming regulations are not expected to take effect until next year, but they have already impacted the niche industry of China-based venture capitalists. China VC deal activity has declined, particularly in artificial intelligence and quantum computing. These developments suggest a shift in the overall risk environment and signal the U.S. government’s intention to shape the economic relationship with China.
Conclusion
The Biden administration’s executive order on U.S. investments in Chinese companies has created significant opportunities for public participation and discussion. The forthcoming regulations will determine the extent of restrictions on certain sectors and transactions. It is important for businesses and investors to carefully assess their exposure and consider the potential risks before making any investment decisions in the sectors mentioned in the executive order.
