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

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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.


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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

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