On Wednesday, US President Joe Biden unveiled an executive order banning new investments in certain tech sectors in China, citing security risks. The order is set to come into effect next year, and the US will be waiting to see if its closest ally will follow suit. However, for now, the UK says it will consider the measures taken by its transatlantic partner, as it continues to evaluate security implications.
“This executive order on outward investment gives important clarity on the US approach,” a spokesperson for the government said in a statement shared with the Financial Times earlier today. “The UK will consider these new measures closely as we continue to assess potential national security risks attached to some investments.”
The forthcoming ban includes new private-equity, venture-capital and joint-venture investments in advanced computer chips, quantum computers, and certain AI systems. Furthermore, companies already doing business in China will need to notify the government of new investments in the sectors. The goal is to hinder the Chinese military from obtaining both US technology and money.
Needless to say, China did not respond kindly to the order, stating it considered the measures to be “blatant economic coercion and technological bullying.”
Tech trade balancing act
This leaves Rishi Sunak and his government with a bit of a diplomatic conundrum. In the declaration on cooperation on export controls between the US and the UK signed in June, the parties agreed to undertake a review of export control, focusing on “end users of concern.” Britain further said it would update its control regime to better “tackle sensitive technology transfers.”
The UK has also stated it is ready to remain closely tied to the approach of the US, especially when it comes to military technologies, and “respond effectively” to any impact British capital and technology could have on shared security concerns.
Mainland China is not a huge destination for UK foreign investment, attracting £10.7bn (€12.4bn) in 2021, compared to the £461.4bn (€537.5bn) that flowed westward across the Atlantic. However, in an update on the government’s foreign policy plan from May, Britain says it will endeavour to shield critical supply chains, but also emphasises the importance of UK-China trade for the British economy.
As technology, economics, and national security is becoming ever increasingly intertwined, it seems we are going to need a whole new school of high-stakes tech diplomacy.