President Joe Biden has implemented an executive order that prohibits U.S. investments in China’s technology sectors, encompassing areas such as semiconductors, microelectronics, quantum computing, and artificial intelligence. The purpose of this order is to prevent the flow of private equity and venture capital investments into sectors that could potentially give China a military advantage and pose significant national security risks. The decision comes as a response to concerns regarding China’s efforts to bridge the gap between civilian and military technology industries, as well as its quest to obtain cutting-edge technologies for military superiority.

The executive order is a direct response to a directive from Congress, which requested a thorough examination and monitoring of U.S. capital flows into technology sectors in China and other nations. As part of the order, the Treasury secretary has been instructed to collaborate with the Commerce Department and other relevant agencies in developing regulations that require private equity and venture capital firms to inform the U.S. government about outbound investments in specified technology fields.

This ban on investment flows to China is just one aspect of the Biden administration’s broader strategy to limit China’s technological advancements, which could potentially pose security risks and challenge U.S. technological leadership. Previous measures include the implementation of export controls on semiconductor chips, as well as restrictions on chip manufacturers expanding their operations within China.

While certain members of Congress are supportive of these measures, there are calls for even more extensive restrictions, including extending the investment ban to cover China’s biotech and energy sectors.