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Biden Administration to Limit Investment in China’s Advanced Technologies

Recently, things have changed subtly again!

According to Bloomberg News, the Biden administration plans to limit the scope of China’s investment controls to new investments in advanced technologies, and due to the bureaucracy of Washington, it is not expected to be implemented until next year.

On the other hand, the US Semiconductor Industry Association (SIA) warned that the Biden administration’s potential restrictions on China’s acquisition of advanced chips may in turn hurt the benefits of chip law subsidies, which in turn will affect the industry’s expansion in the United States.

U.S. Treasury Secretary Yellen also said a few days ago that the investment restrictions on China that the Biden administration is designing “will not seriously damage China’s ability to attract U.S. investment.”

The attitude of the United States has changed again?

According to Bloomberg News, the Biden administration plans to limit the scope of China’s investment controls to new investments in advanced technologies, and due to the bureaucracy of Washington and other influences, it is not expected to be implemented until next year.

White House officials are preparing by the end of August to finalize a proposal for the long-delayed plan to check and even ban U.S. investment in Chinese semiconductors, quantum computing and artificial intelligence (AI).

But people familiar with the matter said that compared with the initial ambitions, the Biden administration now seems to limit the scope to only restricting new investment, and let go of the biotechnology and energy industries. The people familiar with the matter also said that even if the proposal is completed, it may not take effect until 2024 at the earliest.

U.S. Treasury Secretary Yellen said in an exclusive interview with Bloomberg on Monday (17th) that the investment restrictions on China that the Biden administration is designing “will not seriously damage China’s ability to attract U.S. investment.”

Yellen said: “These restrictions will be narrowly targeted and focus on some sectors, notably semiconductors, quantum computing and artificial intelligence, and will not have a broad impact on U.S. investment in China, or in my opinion, on the investment environment in China. Broad control of fundamental impact.” Yellen emphasized that “the measures being planned, as well as the existing export controls, are not retaliation for any specific actions by China, nor are they designed to curb China’s overall growth.”

Yellen made the remarks on the sidelines of the G20 finance ministers meeting in Gandhinagar, India. Other countries at the meeting were also eager to ask Yellen about upcoming restrictions, a senior U.S. Treasury Department official said on a separate occasion.

U.S. officials plan to finalize proposed restrictions on investment in China by the end of August, which could take effect in 2024, people familiar with the matter said. It is reported that these restrictions may “apply only to new investment, focusing on cutting-edge technology, not involving biotechnology and energy industries”.

Warnings from all walks of life

The so-called overseas investment controls are part of the White House’s policy to curb China’s development of a new generation of technology. However, these measures have deteriorated US-China relations and dissatisfied US companies interested in expanding into the Chinese market.

Following October last year, a number of foreign media reports recently pointed out that the Biden administration is considering imposing a new wave of chip bans on China, targeting advanced artificial intelligence (AI) chips. At the same time, after passing the “Chip Act” last year, the Biden administration will allocate US$39 billion to subsidize industry investment in US chip manufacturing.

The US Semiconductor Industry Association (SIA) warned that the Biden administration’s potential restrictions on China’s access to advanced chips may in turn hurt the benefits of chip law subsidies, which in turn will affect the industry’s expansion in the United States. SIA issued a statement on Monday (17th) saying that allowing the semiconductor industry to continue to enter China, the world’s largest semiconductor market, is very important to avoid undermining the positive impact of government subsidies.

The U.S. chip industry has always believed that the government should carefully evaluate the impact of export restrictions, because exporting chips to China can support the industry’s investment in the United States and also help R&D operations to maintain the U.S. advantage in advanced technology.

SIA believes that these restrictions are too broad, ambiguous, and sometimes one-sided, which may weaken the competitiveness of the US semiconductor industry, disrupt the supply chain, and bring significant uncertainty to the market, prompting China to continue to escalate retaliatory actions. The agency called on the Biden administration to consult with the industry before imposing more restrictions.

Not long ago, China had announced a ban on domestic key infrastructure manufacturers to purchase Micron (MU-US) products, and recently restricted the export of gallium and germanium, two metals commonly used in smartphone communication chips.

Currently, the U.S. government is considering restricting industries such as Nvidia (NVDA-US) from developing AI chips for the Chinese market, and blocking China’s access to AI chips through cloud service providers. Biden is expected to restrict U.S. investment in technologies such as China’s advanced chip production in the latest executive order.

On the other hand, in the venture capital world, Sequoia Capital decided to split the U.S. and China businesses into two independent entities, highlighting the risk of economic tension between the U.S. and China. Funds that have cultivated the financing and listing of China’s new industries in recent years The company has dealt a blow.

Emily Weinstein, a researcher at Georgetown University’s Center for Security and Emerging Technology who focuses on U.S.-China technology competition, said that investors should feel at ease about the cautious approach emphasized by the White House. Only very serious matters will be completely banned.

The agencies that draft and review investment regulations include the White House, Treasury, Defense, State, and Commerce. The Ministry of Finance will be the administrator of the scheme. Asked why it took so long to draw up the regulations, Yellen said it’s because people want to do it right, so they’ve been working on the details.

The Biden administration will open the public to review the proposed policies and listen to the opinions of Wall Street and the affected industries. The whole process will take several months, and then feedback needs to be integrated. Therefore, it is not expected to be implemented until next year.

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