U.S. President Joe Biden signed an executive order Wednesday that restricts American investments in mainland China, Hong Kong, and Macao that are engaged in high-tech sectors such as artificial intelligence, semiconductors, and quantum technology.
The White House said, “The purpose is to prevent American investment from threatening the security of the U.S. and its allies and partners by strengthening the military and intelligence capabilities of concerned countries.”
The new executive order, due to come into force next year, applies to investments made through private equity funds, venture capital, mergers and acquisitions, greenfield investment, and joint ventures. The U.S. Department of the Treasury plans to prepare detailed guidelines to distinguish investment projects that need prior state approval.
In response, China’s Ministry of Commerce issued a statement criticizing the U.S. order as “seriously deviating from the principles of market economy and fair competition.”
The move comes after a slew of reports citing the U.S. government considering tightening high-performance chips to China needed for data centers powering artificial intelligence capabilities. Also, there are reportedly U.S. efforts to prevent Chinese cloud companies from operating in the U.S.
This could mean an uphill battle for Chinese companies like e-commerce giant Alibaba, which has grouped most of its artificial intelligence efforts into the cloud unit. Alibaba Cloud was positioning itself as a key computing power provider to start-ups training and using large language models. Earlier this month, it rolled out two types of LLMs as open AI source models, the Qwen-7B and Qwen-7B-Chat.
In a conference call about second-quarter earnings held Thursday, outgoing chief Daniel Zhang said global supply constraints have prevented the cloud unit from meeting consumer demand for AI training due to U.S. restrictions on semiconductor exports to China, which began last year.
Meanwhile, the Financial Times quoted the U.S. Treasury Department as saying the new set of U.S. rules could make exceptions for U.S. investments in publicly traded companies.
Zhang served as head of Alibaba Cloud since last December, and will serve as CEO and chairman of Cloud Intelligence Group, which is slated to go public within a year.