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White House sounds alert on inbound Chinese investment

President Joe Biden has urged his administration to pay close attention to inbound investment deals involving critical technologies such as semiconductors, as part of a continuing effort to address security threats from China.

Biden on Thursday issued an executive order aimed at boosting scrutiny of deals involving foreign companies in high-tech industries such as artificial intelligence, quantum computing and biotechnology. It was aimed at the Committee on Foreign Investment in the US, an inter-agency panel that vets inbound investment for security risks.

Janet Yellen, the US Treasury secretary who chairs the Cfius process, said the executive order would sharpen the government’s focus on protecting national security while maintaining an open investment policy.

“Strengthening our supply chains and protecting against foreign threats enhances our national security,” Yellen said. “It also reaffirms Cfius’s mission to protect America’s technological leadership and the security of our citizens’ sensitive data from emerging threats.”

The order did not mention China by name. However, the industries named closely resemble the list of high-tech sectors that the US believes are a significant target for Chinese espionage, including legal efforts by Beijing to secure access to cutting-edge technology, such as through an acquisition that could later be used to threaten the US.

US intelligence agencies, led by the National Counterintelligence and Security Center, last year launched a campaign to inform companies about links between Chinese companies and the country’s government, military and intelligence services. That effort has focused on AI, quantum computing, biotechnology, chips and autonomous systems.

During a recent visit to London for talks with British intelligence and security officials, FBI director Christopher Wray warned UK companies that China and its spying activities posed a more serious threat to western businesses than even sophisticated companies realised.

The order did not provide Cfius with any new powers. But a senior US official said it would send “a very clear public message to the private sector in a way that the committee’s day-to-day work often can’t about what are some factors that we . . . are very focused on”.

In the order, Biden said Cfius officials should consider the impact of a transaction on the resilience of critical US supply chains, which has been one of his administration’s priorities.

The White House is also considering issuing an executive order to create a screening mechanism for outbound US investment, just one of many efforts to make it harder for China to obtain cutting-edge technology.

“We are looking at gaps in our existing toolkit, including whether it would be or is appropriate to look at some targeted and narrowly scoped requirements around . . . specific kinds of US investment in foreign competitor countries,” said the US official.

While Cfius vets inbound investment deals on a case-by-case basis, a second US official said the executive order was intended to stress that the committee should also examine patterns that pointed to security threats.

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