On Thursday, President Joe Biden will sign an executive order that, according to administration officials, will increase tensions with Beijing by giving the federal government more authority to prevent Chinese investment in technology in the United States and restrict China’s access to private data on citizens.
Congress established the secretive Committee on Foreign Investments in the United States almost 50 years ago. The new order is meant to streamline the Committee’s operations. For a long time, the Committee’s authority was confined to preventing the overseas takeover of American companies whose operations could have a direct impact on national security, such as military contractors.
New directives for the Committee on Foreign Investment in the United States (CFIUS) narrow its focus to transactions that could provide a foreign power with access to critical technologies that Vice President Biden has identified as essential to the growth of the American economy.
According to a White House synopsis, the committee will look into cases that could affect “microelectronics, artificial intelligence, biotechnology and bio-manufacturing, quantum computing, advanced clean energy, and climate adaptation technologies.” The order doesn’t mention China by name, but the technologies it prioritizes are central to China’s “Made in China 2025” initiative, which President Xi Jinping launched seven years ago.
The order from Vice President Biden has been expected for some time, especially since the priorities were left out of a recently passed industrial policy bill in Congress that would have invested heavily in strategic technologies. Nonetheless, “outbound investment” by U.S. companies in foreign countries is not covered by the order, and the Biden administration is likely to seek new authorities to regulate this as well. There has been a long-standing concern that in exchange for access to the Chinese market, China will demand that foreign businesses hand over their proprietary technology.
Ex-director of operations and intelligence for Britain’s Secret Intelligence Service Nigel Inkster wrote in this week’s New York Times opinion section, “For China, this work is about survival,” detailing covert operations by Chinese intelligence operatives to gain technology or manufacturing techniques that would speed Beijing’s way.
It calls attention to the fact that under Chinese law, individuals are obligated to provide secret assistance to the government’s intelligence agencies.
The presidential order codifies in some ways an already established new understanding of the committee’s authority. According to White House officials, the CFIUS group’s authorizing laws, which date back to the Gerald Ford administration, are sufficient to implement Vice President Biden’s order to focus the group on key technologies.
Because of concerns that Chinese state-owned firms were setting up venture capital funds in Silicon Valley and elsewhere to get an early look at new technologies, the interagency group’s power has gradually expanded significantly over the past seven or so years, and it now has the power to block even a minority investment.
According to the White House, the new order will focus less on size and more on the specific characteristics of technologies, such as “advances and applications in technology that could undermine national security.”