Tag: White

The White House and National Security Council declined to comment.

An order along those lines would be far more modest than some of the investment restrictions Biden and Congress considered last year. Then, policymakers proposed setting up a government review board that could deny U.S. deals in a wide swath of Chinese industries — including microchips, AI, quantum computing, clean energy and biotechnology — when they felt national security was at risk.

Backing away from those plans would represent a setback for China hawks in the White House, who have led a campaign to undermine Beijing’s high-tech industries, and could slow the momentum toward strategic separation — or “decoupling” — between American and Chinese industries. And it would underscore how even as diplomatic relations between Washington and Beijing nosedive, strong economic interests continue to bind the U.S. and China together.

Officials in the administration and Congress who have advocated a tougher line with China will be “very disappointed” if the eventual order “falls short of having the authority to reject deals” between U.S. and Chinese firms, said Eric Sayers, a former staffer for the U.S. Indo-Pacific Command during the Trump administration.

But even a scaled back executive order would represent a new chapter for federal oversight of American business overseas. Until recently, the U.S. government largely allowed American business free rein in the world’s second largest economy. But China’s use of U.S. technology and funding to develop its advanced microchips, weapons systems and other defense industries has pushed national security officials to argue for more oversight in recent years. Executive action scrutinizing so-called “outbound investments” represents the next step of that campaign to curtail Chinese technological development, even if it is less aggressive than earlier plans.

“While this [executive order] is the first official step, we shouldn’t expect it to be the last,” said Sayers, now managing director at D.C. consulting firm Beacon Global Strategies. He noted that past investment screening policies, like the Committee on Foreign Investment in the United States, took decades to be fully established. “This will likely be an additive process that grows over time through both executive powers and legislative action,” he said.

Though the final order is still in flux, the administration is likely to set up a pilot program under which U.S. firms doing new deals with Chinese artificial intelligence and quantum computing firms would have to disclose details to government authorities. Biotech and clean energy deals are now likely to be left out of the initial executive order, the people with knowledge said, though regulatory efforts could be extended after the pilot program and opportunities for comment from industry and outside groups.

Such an order would represent a setback for national security leaders in the White House, led by the National Security Council, who have advocated for a more aggressive approach. Last September, national security adviser Jake Sullivan said in a speech that the administration would aim to undermine Chinese development across a numbers of sectors — AI, quantum, chips, biotech and clean energy — that were subject to the original executive order discussions.

But despite continued tensions over Taiwan and the recent surveillance balloon debacle, the administration has since narrowed its approach at the request of the Treasury Department, which has long opposed an aggressive approach to outbound investments and has been meeting with U.S. financial firms since last fall. Momentum for the NSC’s more aggressive approach also slowed after the departure last fall of one of Sullivan’s key deputies, Peter Harrell, who had helped lead the economic campaign against Beijing.

Momentum in Congress also appears to have slowed. Over the past two years, lawmakers have debated bipartisan legislation that would have set up a new federal review panel headed by the U.S. Trade Representative with broad authority to review and deny American investments across a wide swath of the Chinese economy. But they were ultimately unsuccessful in attaching the bill to Congress’ CHIPS Act last year or the yearly defense spending bill.

Now, some Republicans in the House are advocating a narrower approach, with leaders of the House Financial Services Committee pushing legislation that would expand the federal government’s ability to blacklist Chinese firms, but not set up new federal oversight authority. “For the U.S. to compete with China, we cannot become more like the Chinese Communist Party,” Chair Patrick McHenry said at a hearing earlier this month.

The debate will now turn to the Senate, where the Banking Committee will hold a hearing Tuesday on sanctions, export controls and “other tools” like outbound investment screening. While Chair Sherrod Brown (D-Ohio) has been generally supportive of efforts to increase oversight of U.S. firms in China, it is still unclear what changes he and ranking member Tim Scott (R-S.C.) will seek to the bipartisan bill debated last year.