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The writer is the executive director of American Compass
A recent briefing on President Joe Biden’s executive order regarding American investment in China highlighted the narrow scope of the new rules. The restrictions will only apply to three specific technology categories: advanced semiconductors, quantum computing, and artificial intelligence. Furthermore, the rules will exclusively target investments specifically designed for military or intelligence purposes and certain types of private investment, such as venture capital, private equity, and joint ventures.
The officials made it clear that this action is not an economic one and does not aim to decouple the economies of the US and China. Investments related to less-advanced semiconductors or AI systems with dual-use capabilities can still proceed under certain conditions. The decision to implement these rules stems from extensive consultations with over 175 industry stakeholders, including leaders in the semiconductor industry who stress the importance of maintaining access to the Chinese market for their own and the US economy’s success.
However, the Treasury department, led by Secretary Janet Yellen, has advocated against overly broad restrictions that may harm US economic interests. Some industry leaders argue that access to the Chinese market is crucial for investment and capacity-building in the US. Yet, the goal of redeveloping advanced semiconductor fabrication in the US is to meet domestic demand, rather than exporting chips to China.
Moreover, the idea that profiting in China is necessary for US competitiveness is refuted by the example of Intel. During its most innovative years in microelectronics, the company had lower sales and profits but a greater need for innovation. Pulling out of China may align with President Xi Jinping’s ambitions for indigenous leadership in these fields, but if China aims to become self-sufficient and transfers technology aggressively, remaining in the market becomes questionable.
Ultimately, the core argument for staying in China comes down to short-term profits. While lobbying efforts may be expected, it is essential for the Biden administration to prioritize the public interest over private interests in their decision-making.
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