The Joe Biden administration in the US is reportedly about to announce new restrictions on US companies investments in China, noted analyst Christopher Wood of Jefferies said in a research note.

“The word is that Biden aims to sign an executive order in coming weeks that will limit investment in China by American businesses. The executive order will reportedly cover semiconductors, artificial intelligence and quantum computing,” Wood wrote.

Some types of new investment in critical sectors will be prohibited while others will require companies to notify the US government. The US hopes to get an endorsement from its G7 partners on such investment curbs at the G7 summit in Japan which begins May 19, Wood said.

The cumulative direct investment in China by US business totalled $118 billion at the end of 2021, with $57 billion or 48 per cent going into the manufacturing sector.

An April 20 speech by US Treasury Secretary Janet Yellen was clearly an attempt to extend an olive branch. In particular, Yellen stated that US national security concerns “are not designed for us to gain a competitive economic advantage, or stifle China’s economic and technological modernisation”.

It was clearly a reference to the stated policy of the US Department of Commerce to block the supply of advanced semiconductors to China.

Wood said it also seems from a Beijing point of view as a targeted effort by Washington’s national security lobby to stop China from upgrading its economy, which results in the risk that it is stuck in the dreaded middle-income trap given China’s deteriorating demographics.

So Yellen’s tone should be welcomed as an effort to soften the rhetoric of late coming from the likes of National Security Advisor Jake Sullivan or Secretary of State Antony Blinken, who appear at times to be out to pick a fight with China,.

Yellen’s speech represents mixed messages at best. Indeed, China’s Foreign Ministry spokesman Wang Wenbin stated last Friday that Washington’s “true intention is to deprive China of its development rights”. It is pure economic coercion, Wood added.