Last year, President Joe Biden expanded restrictions on U.S. investments in certain Chinese companies by adding extra 59 Chinese firms to a growing blacklist in an Executive Order.
Whether the United States should restrict bank’s investment in Chinese technology companies, the White House national security advocates strict restrictions, but the Treasury Department and the Department of Commerce opposed the move, which delayed President Biden’s final decision.
According to Politico, White House National Security Adviser Jake Sullivan advocated the main reason for the restrictions is that U.S. banks cannot be allowed to help the development of software and hardware in China that would fall into the hands of the People’s Liberation Army.
Meanwhile, the Treasury and Commerce Departments opposed the restrictions, claiming that new rules would affect US business in China, putting American firms at a competitive disadvantage to European and Asian banks that will continue to access the world’s second largest economy.
According to Reuters, after the Executive Order was signed last year, China expressed its opposition in response. Wang Wenbin, China’s Foreign Ministry Spokesperson, said, “We are firmly opposed to this.”
Keith Krach, a former senior State Department official, supported the restrictions. Keith said, “The average American investor has no idea that their own money is financing the Chinese government’s military machine and genocide-enabling surveillance state through a deceptive web of hundreds of malign Chinese companies and thousands of their subsidiaries.”
While some funds and investors have moved to boycott specific Chinese companies, he added, “To accelerate that force, the administration must act further.”
Last summer, Sullivan said that the administration considered penalizing U.S. companies that help China improve its “technological capabilities.” While The White House delayed action, leaving academics and China critics unhappy, lawmakers think of the same legislation.
Senator John Cornyn, who co-sponsored the proposal with Senator Bob Casey to strengthen surveillance of China’s supply chain, said Congress should have acted on the matter earlier. “And something else will intervene again if we don’t get to it.”
The US-China Business Council opposes the Casey and Cornyn bill, saying the limits it sets are overly broad.
The House version focuses on establishing a 52 billion dollar semiconductor development fund as part of broad legislation to ensure U.S. competitiveness against China. But the White House has not yet decided whether to let the Casey and Cornyn bill be incorporated into the House version or to legislate separately.
The bill from two senators would establish a federal commission to review supply chains that run through China. It would also restrict U.S. companies from cooperating with China’s medical, defense, and energy industries. But it would do little to monitor the financial flows into Chinese technology firms that the White House would likely target with executive action. The White House would have to issue a separate executive order to restrict it.