What to Know in Washington: Ambiguity Plagues Biden’s China Rule

Money managers, lobbyists, and members of Congress had hoped President Joe Biden’s long-awaited restrictions on investment in China would make clear what was allowed and what was out of bounds. Instead, they got more questions than answers.

“There’s a lot left to be worked out,” said Jeremy Zucker, head of the national security practice at law firm Dechert LLP. “It’s not clear where the government will draw the line between what’s prohibited and what will merely require notification. That will result in a certain amount of agony in the interim.”

Photo by MANDEL NGAN/AFP via Getty Images

The North Lawn of the White House in Washington, D.C.

The order, released Wednesday, has been two years in the making as the administration sought to balance demands from China hawks focused on national security and the investment community seeking to avoid disruption. The White House wants to create a regime that will restrict US investments in semiconductors, quantum computing, and AI, particularly with military applications without risking the broader economic relationship.

But the Treasury Department’s 46-page “advanced notice of proposed rule-making” released alongside the order — a rough road map for the order’s rules — includes at least 80 separate questions about how it should ultimately structure the program, which firms have 45 days to comment on. The rules likely won’t be final until next year, just months before a presidential election that could upend them anew if Donald Trump gets reelected.

Requests for input range from the open-ended to the specific, and ask for help identifying unintended consequences of the proposed rules at least five times, underscoring how sensitive the debate around the new regulations has become.

Companies will now likely go into “lobbying overdrive” to try to shape the rule, said Emily Kilcrease, a senior fellow at the Center for a New American Security.

Rep. Mike Gallagher (R-Wis.), chair of the House committee focused on competition with China, described the proposed rules as having loopholes “wide enough to sail the PLA Navy fleet through,” using the abbreviation for China’s People’s Liberation Army.

Congress has taken some action on the outbound investment issue, attaching an amendment to the Senate version of the must-pass defense bill that would require firms to notify the government of their investments in certain sectors of the Chinese economy.

Read the full story from Daniel Flatley, Christopher Condon, and Eric Martin.

BIDEN’S AGENDA

• Biden departs the White House shortly after 6 p.m. to travel to Rehoboth Beach, Delaware.

Politics, Probes, and 2024

Biden Says He Wishes Inflation Reduction Act Had Different Name

Biden said he regretted the name of one of his signature legislative achievements — the Inflation Reduction Act — saying the title didn’t draw enough attention to its impact on the overall economy.

Biden Lawyer Gets Skeptical Reception in Social Media Ban Case

The Biden administration received a chilly reception from appeals court judges reviewing an order that would stop government officials from communicating with major social media companies.

Election Commission Takes Step Toward Deepfake Rules

The FEC unanimously advanced a petition requesting it to regulate “deepfakes” in political campaign advertisements, for the first time soliciting public comment on the AI-generated hyper-realistic media.

US Keeps Focus on China

Biden Calls China’s Economy ‘Ticking Time Bomb’

Biden blasted China’s economic problems as a “ticking time bomb” and referred to Communist Party leaders as “bad folks,” his latest barb against President Xi Jinping’s government even as his administration seeks to improve overall ties with Beijing.

• China’s official Xinhua News Agency lashed out at Biden’s comments, saying in a commentary that Biden has once again resorted to the “old trick” of picking at China when domestic problems pile up. Read more.

Taiwan Frontrunner Plans Low-Key US Trip

The Biden administration is preparing for visits from Taiwan’s top presidential candidates in the coming weeks, as the US balances its support for the island’s democratic elections with managing Beijing’s reaction to the trips.

Cyber Iquiry to Probe Microsoft’s Role in Email Breach

The Cyber Safety Review Board will investigate risks in cloud computing, including Microsoft’s role in a recent breach of government officials’ email accounts by suspected Chinese hackers.

What Else We’re Reading

Supreme Court Halts Purdue’s Opioid Pact

The Supreme Court agreed to consider scuttling Purdue Pharma’s $6 billion opioid settlement, taking up a Biden administration appeal that contends the accord improperly shields the Sackler family members who own the company.

Sacred Tribal Canyon Tests Limits of Potential Energy Bonanza

A House Republican bill to nullify the Biden administration’s move to protect swaths of federal land from drilling is reigniting a dispute over energy development winners and losers.

Gun Owners Challenge DOJ Rule Expanding ‘Machinegun’ Definition

The Department of Justice policy to classify firearms with added forced reset triggers as “machineguns” faces a legal challenge from Texas gun owners and sellers.

US Suicides Rose to a Record High in 2022

The number of suicides in the US climbed to a record level in 2022 following a two-year reprieve. Annual suicides rose 2.6% last year to 49,449, according to a CDC report. They increased for most demographic groups, but fell for young people and among American Indian or Alaska Native people.

Editor’s Note: BGOV’s What to Know in Washington will not publish during the congressional recess weeks of August 14-25. Publication resumes Monday, Aug. 28.

To contact the reporter on this story: Giuseppe Macri in Washington at gmacri@bgov.com

To contact the editor responsible for this story: Kayla Sharpe at ksharpe@bloombergindustry.com