President Joe Biden signed an executive order on Wednesday restricting investments in certain Chinese technology sectors aiding the advancement of China’s military, but critics argue that the restrictions fall short of properly curtailing investments and have too many loopholes.
In an effort to bolster national security, Biden’s order will aim to prevent U.S. investments in Chinese companies that develop technologies used to upgrade China’s military, such as microchips and artificial intelligence systems. However, the order doesn’t address existing investments and leaves room for certain exemption gaps, making it too “diluted” to be effective, according to GOP lawmakers and foreign policy experts.
“The President’s new executive order is a small step in the right direction, but not sufficient given the scale of the problem,” said Bryan Burack, Senior Policy Advisor at the Heritage Foundation. “It’s a national security imperative to stop the CCP from leveraging our economy to develop technologies that can be turned against our men and women in uniform. Unfortunately, this order has loopholes big enough to sail a warship through, and it was clearly diluted by those who profit alongside the CCP.”
The restrictions will apply to “narrow subsets” within Chinese companies that specialize in three technology categories: semiconductors, quantum information systems and artificial intelligence systems, according to Axios. Treasury and Commerce Department officials worked to limit the scope of the restrictions to “the most acute” security risks, aiming to keep overall U.S.-China investments strong and fearing broad-reaching restrictions would be difficult to enforce, according to The Wall Street Journal.
Biden declared a national emergency over the matter and said technology advancements in China’s military “[constitute] an unusual and extraordinary threat to the national security of the United States,” in a letter sent to Congress Tuesday.
“Certain United States investments may accelerate and increase the success of the development of sensitive technologies and products in countries that develop them to counter United States and allied capabilities,” reads the letter. “I hereby declare a national emergency to deal with this threat.” (RELATED: ‘Weakest Our Country Has Ever Been’: Donald Trump Says He Believes Biden Is ‘Fully Compromised’)
It’s next to useless in its current form. And it will be even further diminished during the corporate “comment” period.
As if we needed any further evidence that Treasury & Commerce are captured by industry. https://t.co/AwgGIdI559
— China Beige Book (@ChinaBeigeBook) August 9, 2023
The restrictions will not apply to current U.S. investments in China –which equate to roughly $1.38 trillion – and if it did, it would only affect an estimated 1% of investments, according to Derek Scissors, Asia economist at the American Enterprise Institute. The Treasury Department could ask for disclosures on existing investments, but only future investments will be affected by the restrictions, and portfolio investments in Chinese bonds and stocks won’t be covered under the order, according to the WSJ.
Additionally, certain investments can be subject to exemptions, but which investments will qualify for exemption status have yet to be decided.
“How can this not have been decided? Treasury had two years to consult interested parties… The financial sector has of course already demanded exceptions to let investment flow as it likes, which is basically what Secretary Yellen promised. We don’t know how much money each exception covers. This has been a painfully long charade,” Scissors wrote.
Investments that will qualify for exemption status will require the Treasury Department, which will oversee the operational aspects of Biden’s order, to be notified in advance, Axios reported. Because the Treasury has yet to decide what falls into the restricted category, a variety of Chinese technology companies that fall into the three categories Biden outlined could still receive U.S. investments, according to Burack.
“Even for those three specific technologies, investments may not even be restricted to a significant degree; most investments will not be prohibited but will only require notification,” said Burack. “It seems very likely that the restrictions were weakened by lobbying, particularly lobbying from the financial services industry, to affect as little investment in China as possible.”
Republicans such as Florida Sen. Marco Rubio and Wisconsin Rep. Mike Gallagher, who chairs the House Select Committee on the Chinese Communist Party, reprimanded the Biden administration for failing to take harsher steps and said “loopholes” make the restrictions too weak to be effective.
“This narrowly tailored proposal is almost laughable,” said Rubio in a statement on Wednesday. “It is riddled with loopholes, explicitly ignores the dual-use nature of important technologies, and fails to include industries China’s government deems critical. The U.S. needs to do better than this.”
“Congress needs to step up now and ensure we stop funding the CCP’s military buildup, techno-totalitarian surveillance state, and human rights abuses including the ongoing genocide in Xinjiang,” Gallagher said in a Wednesday statement. Gallagher previously spearheaded the launch of an investigation in July into multiple venture capital firms linked to China’s military and Chinese human rights violations.
House Foreign Affairs Committee Chairman Michael McCaul shared the sentiments of his Republican colleagues and called on the Biden administration to stop “solely pursuing half measures that are taking too long to develop and go into effect” in a statement released Wednesday. (RELATED: Chinese Spy Agency Calls On Society To Help With Espionage Work)
Conversely, Senate Majority Leader Chuck Schumer praised Biden’s executive order, calling it “a strategic first step to ensure American investment does not go to fund Chinese military advancement,” in a statement on Wednesday.
The Biden administration reportedly worked with a number of allies and the Group of Seven Nations in formulating the restrictions. Treasury Secretary Janet Yellen discussed the restrictions with her Chinese counterparts during her visit to Beijing in July, according to CNN.
The restrictions are expected to be applied next year and will go through multiple rounds of public comments, as well as an extended 45-day comment period, according to Reuters.
“After discussing the [executive order] with half the planet, there will be an extended period for more comments. Any bets if this produces tighter or looser restrictions?” wrote Scissors. “A possible time for ‘full’ implementation is five months before the 2024 election. After the election, a second Biden administration could simply drop the [executive order], with much less political accountability.”
Despite the perceived weakness of the executive order, Beijing said it was “gravely concerned” about the new restrictions and hopes the U.S. will abstain from “artificially hindering global economic and trade exchanges and cooperation,” according to Reuters.
The White House and Treasury Department did not immediately respond to a request for comment.
All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.