Uncertainty about China has caused a reduction in U.S. investment in the world’s second-largest economy, and now, the Biden Administration is poised to trigger more of a slowdown.
President Biden is set to sign an executive order that would curb investment in China’s tech industry, limiting its strength in the semiconductor market and effect on global supply chains. The action would establish a system for monitoring and blocking investment.
Both Democrats and Republicans seem to back the move, which would focus on advanced semiconductors, some types of artificial intelligence, decryption capabilities, and industries supporting Beijing’s military and economic strength, according to Bloomberg. Similar legislation has been introduced in the past but never completed.
The new order would require that U.S. companies reveal more information on their business with China and give the government power to challenge potential transactions based on national security concerns.
To prepare, some private equity and venture firms are assessing their investments in terms of national security.
“Some investors have taken the extra step of divesting from problematic Chinese companies now rather than divesting at a discount after the executive order is released,” H.K. Park, Managing Director of Crumpton Global, former Pentagon official, and reviewer of such deals, told Bloomberg.
U.S. Assistant Treasury Secretary Paul Rosen and General Counsel Neil MacBride have told money managers and business executives that an order is coming by the second quarter, Bloomberg reported. A notice and comment period spanning months will happen before the law would go into effect.