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Biden Issues New Order Blocking Chinese Investments in US Tech

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The new order directs CFIUS to focus on certain types of deals that give foreign powers access to technologies Biden has identified as critical to America’s economic growth. According to the White House summary, this includes “microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, and advanced clean energy and climate adaptation technologies.”

China isn’t specifically mentioned, but they’re all part of the “Made in China 2025” movement that President Xi Jinping started seven years ago, and the US is now investing more federal government in technology. There is also. means.

The executive order partly formalizes a new, broader interpretation of the commission’s mandate that has been underway for several years. White House officials say Biden has ordered CFIUS to focus on specific technologies, but they don’t believe the licensing laws need to be amended.

For most of its history, CIFIUS has only investigated deals in which foreign companies attempted to purchase control of US companies that deal with sensitive technology. In many cases, it blocked some such sales because it concluded that the companies provided weapon systems or products used by intelligence agencies. (The Department of Defense and the Intelligence Agency are members of the committee.) In other cases, American companies have had to sell highly sensitive products and technology before the deal can be completed.

However, over time it became clear that a foreign company did not need to own a majority stake in a company in order to access key technology. Thus, in the last seven years or so, the power of inter-agency groups has grown significantly and now holds the power to block even minority investments. This is partly due to concerns that China’s state-owned enterprises are setting up venture capital funds in Silicon Valley and beyond to get an early look at new technologies.

A White House statement said the new order would incorporate that approach and would focus on the characteristics of the technology itself, including “advancements and applications of technology that could undermine national security,” rather than the scale of investment.

CFIUS members are not required to demonstrate that a technology is currently essential to national security as long as it has the potential to do so. For example, artificial intelligence software or quantum computers that create or break strong encryption of data could trigger government action and keep technology out of the hands of China and other competitors. .

The order also gives the commission powers to block transactions that “undermine U.S. cybersecurity.” and urges a review of “progressive investments in sectors or technologies over time” that may “partially cede domestic development or control in that sector or technology.”

David McCabe contributed to the report.