US investment in Chinese tech might be cut

The investment curbs taking shape would likely come as an executive order to be signed by President Joe Biden in coming months, one of the people said Friday evening. 

A separate action against TikTok Inc., the hugely popular video-sharing app, is a possibility but no action is imminent, the person added. The Commerce Department, the person said, may place further restrictions on chips used for artificial intelligence computing.

At the same time, the White House is in discussions with Congress on legislation requiring companies to disclose beforehand possible investments in certain Chinese industries, another of the people said. 

Among options being discussed is the establishment of a system that would give the government the authority to block investments outright, that person said. 

The person indicated that the executive order was part of a broader strategy, pointing out that the US had recently curbed sales of semiconductors to China and Russia. Last month, Biden signed into law a broad competition measure that includes about $52 billion to bolster domestic semiconductor research and development.

The White House declined to comment on Friday night. TikTok representatives did not immediately respond to a request for comment.

The Commerce Department expects to have an update on steps to protect Americans’ data from foreign-owned apps by the end of the year, the department’s press office said earlier this week.

US companies are under increasing government scrutiny over what they sell to China, whose electronics factories and consumers make it the biggest buyer of chips. Washington has been tightening restrictions on sales to the country, arguing that it represents a security risk.

Nvidia Corp. tumbled Thursday after the chipmaker said new rules on the export of some artificial intelligence chips could affect hundreds of millions of dollars in revenue.

The executive order, according to some of the people, is intended to address some of the concerns contemplated in the National Critical Capabilities Defense Act introduced by Senators John Cornyn, a Texas Republican, and  Bob Casey, a Pennsylvania Democrat.

The people familiar with the administration discussions described them on condition of anonymity because no decision has been made. Semafor reported earlier on plans for an executive order.

The US has up to now pursued a patchwork policy that’s stopped short of flat-out locking the Chinese out of the semiconductor industry. It’s concentrated on singling out individual companies such as Huawei Technologies Co. and Semiconductor Manufacturing International Corp. that it’s accused of being a threat to national security. Both companies deny the allegation.

Recent steps have indicated that the administration is leaning toward a more hawkish stance of banning Chinese access to whole swaths of technology.

The Biden administration is also scrutinizing TikTok, paying close heed to whether the Chinese government has access to American customer data. The company, whose parent is Beijing-based Bytedance Ltd., has told lawmakers it has taken steps to protect US user data, including through a contract with Oracle Corp, following then-President Donald Trump’s failed attempt to ban the app from the US.

Venture capital investment in Chinese tech startups, both in total dollars and deals, has increased steadily since 2019. Those investments hit $118 billion last year — the second highest on record, according to data firm PitchBook, with US based venture investors participating in roughly a quarter of those deals.

Wariness about Chinese technology giants has arisen in many countries. For instance, UK Foreign Secretary Liz Truss has pledged to crack down on companies including TikTok during a recent head-to-head debate with Rishi Sunak as part of their campaign to succeed Boris Johnson as prime minister.