The U.S. government's focus on technological competition with China may lead to new rules curbing foreign tech investments.
The Biden administration is allegedly working on an executive order limiting investments in certain technologies, such as artificial intelligence, in overseas countries, according to reporting by the Wall Street Journal earlier this month. Biden has yet to issue such an executive order, but his proposed FY 2024 budget released March 9 requested "discretionary and mandatory resources to out-compete China and advance American prosperity globally."
"China is the United States' only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it," according to the budget.
The Biden administration already imposed export controls in October 2022 limiting China's ability to acquire advanced computing chips and is considering further limiting exports to the country. But issuing rules on investments in the Chinese tech sector would be a "radical departure" from former U.S. industrial policy, said Chris Meserole, director of the Brookings Institution's Artificial Intelligence and Emerging Technology Initiative.
"In principle I'm not averse to cutting off nodes of funding from the U.S. to the Chinese tech sector," he said. "The devil will be in the details of how narrowly they are going to circumscribe different investments."
For Robert Atkinson, president of the Information Technology and Innovation Foundation, working closely with allies on export controls and tech transfer limits is "critical."
"Limiting exports of key technology to China can be an important tool to push back against unfair Chinese government technology policy," Atkinson said. "But unless our allies cooperate, we risk simply cutting off U.S. exports and ceding the marketplace to foreign firms."
Tensions between the U.S. and China have escalated as concerns about China's technological advancement are increasing fears among policymakers about how the country might use its position as a global leader in certain technologies. Meserole said that could include the country's use of AI for commercial surveillance or moving against Taiwan, a global leader in semiconductor manufacturing.
The U.S. government should've acted on the competitive threat in advanced technology development posed by China 10 years ago, but Meserole said it's not too late.
U.S. competition with China
One of the Biden administration's first steps in competing with China on a technological front stemmed from legislation Congress passed last year. Before that, former U.S. president Donald Trump also took actions to counter China's growing influence.
Biden signed the Bipartisan Infrastructure Law and the CHIPS and Science Act of 2022 into law last year, which increased investments in domestic manufacturing of technologies like semiconductors as well as research and development into AI and quantum computing.
Chris MeseroleDirector, Brookings Institution's Artificial Intelligence and Emerging Technology Initiative
The legislation aims to stem the tide of more than 30 years of U.S. investment and interconnectedness with China, Meserole said. He described increasing U.S. efforts to compete with China as "the ocean liner that takes a while to turn around."
Meserole said U.S. investment in China over the years, particularly in the early 2000s, marked a historical moment where it seemed like investing in the country's industrial and technological development would also influence it, over time, to become more open and less authoritarian economically and politically.
At the time, U.S. leadership in advanced technology development was powerful enough that leaders didn't foresee the possibility of losing that position, he said.
However as Chinese President Xi Jinping came into power in 2013 and the country flourished economically, it didn't come with the kind of political change the U.S. anticipated, Meserole said.
"No administration prior to the Trump administration really thought there is a significant chance that China is going to get so good at this that they could surpass us in certain areas of technological development," Meserole said.
Since China has grown substantially without having liberalized, it means they're going to be a strategic competitor to the U.S., he added.
"We created a regime that is very powerful economically," he said. "They are learning how to flex that economic might and convert it into political and strategic power."
Additional investments needed to boost U.S., China competition
Beyond measures the U.S. has taken already, Meserole said, it's incumbent on both the U.S. and European Union to set standards for use of technology like AI to protect against its misuse by governments and corporations globally.
He said it's also crucial for the U.S. to focus on immigration reform as part of boosting its technological expertise while investments allow new semiconductor plants and other facilities to be built stateside. Immigration reform is a hot button issue that has long been a struggle for Congress to resolve.
"The only way we create a vibrant ecosystem domestically is by bringing in experts around the world to staff these facilities and then, hopefully, stay," he said. "We don't have that expertise in house right now."
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.