
U.S. Congress Considers Legislation to Restrict Investments in Chinese Industries Funding Military Development
The U.S. Congress is focusing on American funding for China's military, aiming for enduring laws to restrict capital flow.

The U.S. Congress is intensifying efforts to scrutinize American capital alleged to have funded China's military development. This heightened scrutiny suggests that increased oversight of U.S. investments in China could extend beyond presidential terms and potentially become enshrined in law.
Seeking Enduring Solutions
After encountering setbacks in 2023 with attempts to block U.S. investments in certain Chinese industries, some members of the House of Representatives are pressing forward with their efforts.
"I do think Congress needs to step up and legislate an enduring solution to this problem, because otherwise, we're going to ping pong back and forth between different administrations and different executive orders, or different regulators saying different things," emphasized Mike Gallagher, chairman of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party.
Gallagher, who also chairs the House Armed Services Subcommittee on Cyber, Information Technologies and Innovation, along with the Permanent Select Committee on Intelligence, stressed the need to cut off the flow of funds in advanced technology sectors, stating, "We can't afford to keep funding our own destruction."
Legislative Actions
The House Select Committee on the Chinese Communist Party, formed in January last year, spearheaded a bill to effectively ban TikTok in the U.S. unless its Chinese parent company ByteDance sells the popular social media app. The bill successfully passed the House and is now awaiting approval in the Senate to become law.
Furthermore, the House select committee published a report in February alleging that U.S. venture capital firms had injected billions into companies in the People's Republic of China (PRC), which were contributing to the CCP's military, surveillance state, and Uyghur genocide.
Research Findings
A study conducted by "Future Union," a bipartisan advocacy organization focusing on emerging technology and security challenges, has shed light on the connections between U.S. capital, venture firms in China, and Chinese tech startups since late 2023. The report emphasized the need for accountability and fidelity to the rule of law in the capital markets and private sector to uphold America's interests.
Future Union also released a list recognizing top venture investors in technology and defense that are actively advancing America's interests through explicit actions.
"We have not taken money from any outside groups. It's a bipartisan group. I'm the one that can be public, but there aren't any vested interests," clarified Andrew King, the executive director of Future Union, and managing partner at venture capital firm Bastille Ventures in San Francisco.
Challenges in Passing Restrictions
While being tough on Beijing enjoys bipartisan support, the U.S. government has faced challenges in implementing sweeping restrictions on investments in China. In July, the Senate passed a bill requiring U.S. investors in advanced Chinese technology to notify the Treasury Department. However, the legislation did not pass the House.
The Biden administration issued an executive order in August aimed at curbing U.S. investments into semiconductor, quantum computing, and artificial intelligence companies, citing national security concerns. The House Foreign Affairs Committee introduced the "Preventing Adversaries from Developing Critical Capabilities Act" to restrict investments in hypersonics and high-performance computing, but its path to becoming law remains uncertain.
Chinese Response and U.S. Perspective
Following the release of Biden's executive order, China's Ministry of Commerce called upon the U.S. to "respect the market economy and the principles of fair competition" and to "refrain from artificially hindering global trade and creating obstacles that impede the recovery in the global economy."
On the other hand, King anticipates that U.S. firms will need to notify Washington about investments related to quantum computing and artificial intelligence in China, emphasizing the likelihood of increased transparency on the horizon. However, he suggested that Congress may not be fully inclined to impose hard restrictions due to various entrenched interests. He highlighted that the focus of legislation is more on companies with military industrial ties or connections to sanctions, entity lists, or export controls.
Stifling China's Access to Technology
In addition to placing specific Chinese companies on blacklists, the U.S. Department of Commerce has in the last two years announced extensive restrictions aimed at impeding China's access to advanced semiconductor technology.
While U.S. institutional investment into China has largely paused due to regulatory uncertainties, King foresees a potential lucrative market once China navigates through its economic cycle.
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