U.S. to Ban Some Investments in Chinese Tech Firms.

"The U.S. is set to ban private-equity and venture-capital investments in some Chinese technology companies under an executive order the Biden administration released, escalating Washington's efforts to prevent Beijing from developing cutting-edge technology for its military.

The executive order is expected to cover direct investments in three technology sectors: semiconductors, quantum computing and artificial intelligence. It would prohibit investments in some forms of those technologies, while requiring Americans doing business in China to inform the U.S. government about investments in the three high-tech sectors more broadly.

Investors that violate those rules may face fines and be forced to divest themselves of their stakes, according to people familiar with the order. Before enforcing the new rules, the Biden administration is expected to accept feedback on them, which are expected to apply to future transactions and won't cover portfolio investments in Chinese stocks and bonds, according to the people.

The rules are expected to technically also apply to investments into other adversaries such as Russia, but they are expected to only practically affect U.S. investment into China.

A Treasury spokesman declined to comment.

The executive order is a product of a growing bipartisan concern that American technology and know-how could inadvertently help Beijing develop weapons it could use against the U.S. in a military conflict. The Biden administration last year restricted exports of advanced semiconductors and chip-manufacturing equipment to China, and the U.S. has also heightened scrutiny of Chinese investment in American technology companies.

While Biden administration officials have cast the moves as targeted efforts to protect U.S. national security, officials in Beijing say they are aimed at kneecapping China's economic growth and development. 

Chinese President Xi Jinping complained to President Biden about the export controls on semiconductors last year. And in a step widely interpreted as retaliation for the U.S. export restrictions, China banned its major firms from buying technology from Micron Technology, the largest memory-chip maker in the U.S., earlier this year.

The new investment restrictions risk refreezing an attempted thaw in diplomacy between the two superpowers.

U.S. investment into China, which helped drive the country's economic development, has slowed in recent years as the geopolitical rivalry has intensified. Direct U.S. investment into China hit a 20-year low of $8.2 billion last year, according to Rhodium Group, which also said U.S. venture-capital investment hit a 10-year low of $1.3 billion last year.

It is unclear how much of that goes toward the targeted sectors. A report by Georgetown University researchers found that U.S. investors were involved in 401 transactions in Chinese AI companies between 2015 and 2021, with investments from exclusively American investors amounting to $7.45 billion in that period.

As they crafted the executive order, Biden administration officials struggled with how to distinguish forms of artificial intelligence that primarily pose a national-security risk from others that are broadly used for everyday commercial purposes, according to people familiar with the talks.

Even ahead of their release, the new capital controls have started to reshape U.S. investor behavior. Venture-capital fund Sequoia Capital split off its China business earlier this year after persistent scrutiny in Washington. Other firms have slowed or paused transactions in China as they await the new rules, according to people familiar with their thinking.

Industry groups in Washington sought to narrow the rules, which the Biden administration spent more than a year crafting. Other proposals to limit U.S. investment in China have been broader.

A bipartisan group of lawmakers last year called for the creation of an interagency panel that would have screened investments in a wider range of technologies. Two lawmakers this year revived elements of that plan in an amendment adopted by the Senate to its annual defense policy bill. Their legislation would require disclosure of investments, rather than prohibitions, and may not become law.

Rep. Mike Gallagher (R., Wis.) and the House committee dedicated to China have called for restrictions that also apply to the much larger flows of U.S. portfolio investment into China. In a recent letter, the committee criticized BlackRock and MSCI, a top stock-market-index compiler, for facilitating investment in Chinese companies the U.S. government has accused of bolstering China's military and violating human rights.

Within the Biden administration, officials from the Treasury and Commerce departments had successfully sought to limit the scope of the executive order, according to people familiar with the deliberations." [1]

Considering the proven ability of Chinese company Huawei to produce advanced chips for its phone, achievements of China in artificial intelligence and quantum computing research,  the horse left the barn, while we, the West, are still busy trying to close the doors of the barn. Political goals will be reached though. We, humans, need an enemy to collaborate more closely with people more similar to us. This why we should consider seriously, that America from one side, and Russia/China from another side will part their ways in science, technology, and economy.  These two huge powerful masses started drifting apart. Nothing we can do about it.

1. World News: U.S. to Ban Some Investments in Chinese Tech Firms. Duehren, Andrew. 
Wall Street Journal, Eastern edition; New York, N.Y.. 09 Aug 2023: A.7.