President Joe Biden’s efforts to curb the flow of strategic U.S. technologies to China have faced criticism from Congress. Despite the measures taken, many lawmakers believe that more needs to be done.
Republican Representative Mike Gallagher from Wisconsin and the chairman of the House Select Committee on the Chinese Communist Party expressed his lack of confidence in the Treasury Department’s ability to aggressively implement new restrictions on U.S. investment in Chinese companies engaged in militarily applicable advanced technologies, as proposed by Biden last month.
During an event hosted by the Council on Foreign Relations, Gallagher criticized Biden for entrusting the Treasury Department with a prominent role and providing too many avenues for exemptions. He pointed out that historically, the department has maintained a more lenient stance towards China compared to other executive departments, even during the previous Trump administration.
Gallagher emphasized the need for stricter legislation to prohibit U.S. entities from investing in specific sectors of the Chinese economy. He particularly highlighted artificial intelligence and microelectronics as areas where investment restrictions should be imposed, stating that financing our own destruction should be avoided.
The scrutiny faced by Biden’s approach underscores the ongoing concern in Congress about safeguarding U.S. technologies and mitigating potential risks associated with China’s advancements.
The Inadequacy of Biden’s Investment Restrictions
In a recent discussion, the argument was put forth that the Biden administration’s approach to outbound investment restrictions falls short in addressing the larger issue. While private investment is being blocked, Chinese companies trading on stock exchanges are still allowed to receive investment. However, this partial measure fails to tackle the whole problem.
According to Derek Scissors, the chief economist for the China Beige Book, Americans currently have over $1 trillion invested in Chinese stocks and bonds. Interestingly, the outbound investment rule proposed last month seems to suggest exempting this type of investment from any restrictions.
Although the value of U.S. listed shares of Chinese companies has suffered in recent months due to a slowdown in the Chinese economy, American investors’ interest in these companies remains significant.
Additionally, criticism was raised regarding President Biden’s comments on China’s reduced “capacity” to invade Taiwan as a result of its economic slowdown. Contrary to this statement, it was emphasized that Xi Jinping, China’s leader, is actually preparing for war. In fact, the economic challenges faced by China domestically could heighten the likelihood of an invasion. It is suggested that Xi might believe that a war for Taiwan could divert attention from his failed domestic policies.
These concerns shed light on the insufficiency of current measures and raise important questions about the wider flow of money into China.