"Semiconductor and Other Chinese Investments Banned" US Prepares Executive Order Regulating Domestic Companies

The Biden administration in the United States is expected to announce unprecedented regulations this month that will restrict American companies' investments in China, focusing on advanced industries such as semiconductors. As the US-China conflict over technological supremacy becomes more overt, repercussions for Korean companies are also inevitable.

According to US political media outlet Politico on the 19th (local time), the Biden administration recently briefed industry groups, including the US Chamber of Commerce, on the outline of an executive order restricting investments in China. Initially, the Biden administration planned to review the executive order by the end of last year and announce it in February. However, internal controversy over the "unprecedented regulation on private companies" reportedly caused delays in the review process.

The soon-to-be-released executive order will include a requirement for US companies investing in Chinese advanced technology firms to report related information to the government. Investments in semiconductors are expected to be completely banned. Politico reported that the Biden administration has been reviewing regulations in five sectors: semiconductors, artificial intelligence (AI), quantum computing, biotechnology, and clean energy, but currently, biotechnology and clean energy sectors are likely to be excluded.

A senior official said, "Some are still in the final stages," adding, "If US companies invest in Chinese technology, some prohibitions will be included." Earlier, the Wall Street Journal (WSJ) also reported that the Biden administration has been weighing restrictions on investments in China, including banning US private equity and venture capital investments in quantum computing and advanced semiconductors.

[Image source=Reuters Yonhap News]

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To maintain technological supremacy, the US has been openly trying to exclude China by reorganizing the global supply chain centered on itself. The passage of the Inflation Reduction Act (IRA), which provides tax credit benefits only for North American electric vehicles, and the CHIPS and Science Act (CSA) last year are not unrelated to this. In particular, the US included a "guardrail" provision in the CSA, stipulating that companies receiving US subsidies cannot invest in cutting-edge semiconductor facilities in China for the next ten years. Last year, the US also announced export controls banning exports of advanced semiconductors and semiconductor manufacturing equipment to China.

If the Biden administration regulates private companies' investments in China, the impact is expected to be even greater. During the Trump administration, when the US-China trade war intensified, measures to block investments in Chinese advanced companies were considered but never implemented. Additionally, this year, tensions between the US and China have escalated due to incidents such as the Chinese surveillance balloon and China's potential military support for Russia. Amid growing global recession concerns, there are fears that if relations between the world's two largest economies reach a breaking point, it could push both economies into decline.

This investment regulation draws attention as it is announced at a time when the Biden administration has recently suggested easing tensions and improving trade relations with China, especially in the economic sector. Politico reported last week that the Biden administration's economic team delivered somewhat conciliatory messages at the International Monetary Fund (IMF) and World Bank (WB) Spring Meetings held in Washington DC, but "despite this conciliatory tone, the US is preparing actions targeting key sectors of the Chinese economy. Besides investment restrictions, measures such as banning TikTok are being pursued, and tariff increases on China are also possible." This reaffirms the Biden administration's message to firmly maintain US superiority over China in advanced industries such as semiconductors.

Earlier, the White House announced that it is conducting consultations for the visits of Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo to China. Jay Shambaugh, US Treasury Deputy Secretary for International Affairs, said at a Brookings Institution discussion last week, "It is important to make clear that the US is not trying to decouple from China or limit China's growth in any way," adding, "While the US will sometimes take national security measures targeting Chinese companies, this is not about the US seeking economic gains from China."

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