'Blatant economic coercion': China slams Biden's order limiting U.S. overseas tech investment

China sharply rebuked President Joe Biden's long-awaited enforcement order that limits U.S. concern successful exertion — but stopped abbreviated of issuing contiguous antagonistic measures.

The Chinese commerce and overseas affairs ministries issued beardown responses connected Thursday, conscionable hours aft Biden signed disconnected connected the measurement targeting "countries of concern" connected the ground of nationalist security.

"China is powerfully dissatisfied with and resolutely opposed to the U.S.'s insistence connected introducing restrictions connected concern successful China," the overseas ministry said successful a statement, according to a CNBC translation. "This is blatant economical coercion and technological bullying."

The Chinese Commerce Ministry called upon the U.S. to "respect the marketplace system and the principles of just competition" and to "refrain from artificially hindering planetary commercialized and creating obstacles that impede the betterment successful the planetary economy."

"The connection is rather clear," Eswar Prasad, a prof successful planetary commercialized astatine Cornell University, told CNBC Thursday.

"Washington wants to usage the nationalist information imperative arsenic a mode of trying to bounds the transfers of exertion and investments related to exertion to China, due to the fact that there's not conscionable a nationalist information angle, but besides rather frankly, a commercialized angle," helium added.

On Wednesday, Biden signed disconnected connected the enforcement bid that limits U.S. concern and expertise successful semiconductors and microelectronics, quantum computing and definite artificial quality capabilities successful China, Hong Kong and Macao.

The latest bid bears immoderate similarities to a toned-down mentation of the archetypal Outbound Investment Transparency Act the Senate precocious passed and omitted wording for an outright prohibition connected investment.

It comes amid an escalating contention for planetary technological supremacy that has some nationalist information and economical implications.

"I deliberation it is going to person a beauteous wide chilling effect connected exertion transfers and investments by U.S. firms successful China," Prasad said.

Biden warned successful the enforcement bid that definite American investments whitethorn lend to "the improvement of delicate technologies and products successful countries that make them to antagonistic United States and allied capabilities."

"I find that countries of interest are engaged successful comprehensive, semipermanent strategies that direct, facilitate, oregon different enactment advancements successful delicate technologies and products that are captious to specified countries' military, intelligence, surveillance, oregon cyber-enabled capabilities," said the president, who further characterized the concern arsenic "a nationalist emergency."

"The concern restrictions mostly reflector export controls already successful place, including those that prohibition exports to China of machinery and bundle utilized to nutrient precocious semiconductors," Gabriel Wildau, a Teneo managing manager focusing connected China governmental risk, wrote successful a enactment to clients.

"Unprecedentedly pugnacious restrictions that the US Commerce Department issued successful October (soon to beryllium expanded) already rendered caller U.S. concern successful precocious Chinese semiconductor accumulation efficaciously impossible, since immoderate specified mill would request imported instrumentality covered by those restrictions," helium added.

During a sojourn to Beijing successful July, U.S. Treasury Secretary Janet Yellen assured her Chinese counterparts that immoderate curbs connected U.S. outbound investments would beryllium "transparent" and "very narrowly targeted."

Biden's enforcement bid though is inactive immoderate mode from becoming factual legislation.

The U.S. Treasury has been tasked to formulate nonstop regulations to instrumentality the order, including defining the bound betwixt prohibited transactions and those that simply necessitate notification.

Late Wednesday, the U.S. Treasury Department invited nationalist comment to "seek aboriginal stakeholder information successful the rulemaking process" — including input connected the sub-sets of nationalist information technologies and related products to the areas of exertion identified successful Biden's enforcement order.

The Treasury Department said it anticipates excepting definite transactions, including perchance those successful publicly-traded instruments and intracompany transfers from U.S. parents to subsidiaries. 

Biden's enforcement bid comes astatine a clip erstwhile a raft of economical information has underscored slowing maturation momentum successful the world's second-largest economy.

Official information Wednesday showed that China's consumer prices fell for the archetypal clip successful 2 years successful July from a twelvemonth ago, arsenic shaper prices declined connected a year-on-year ground for a 10th consecutive month.

"I don't deliberation the U.S. Treasury oregon the [Biden] medication planned it this way, but this is spectacularly atrocious timing for China," Prasad said. "Confidence is falling, maturation is stalling, China seems to beryllium sliding into a downward spiral with deflation, debased maturation and deficiency of assurance each feeding connected each other."

"This does precise small to animate assurance that China is going to beryllium capable to propulsion backmost connected short-term growth. And this could besides impact its semipermanent maturation imaginable due to the fact that China is precise anxious to determination into precocious tech, higher value-added industries," Prasad said.

As portion of its program to bolster growth, China's apical leaders person recently changed their tone connected private and overseas investors, portion anticipating the country's post-pandemic economical betterment to proceed successful a "tortuous" manner.

"At the moment, its home innovation programme is not going that well. China inactive needs overseas exertion — it needs overseas superior a batch little than overseas technology. Without overseas technology, I deliberation it's precise hard for China to marque that leap," helium added.

— CNBC's Evelyn Cheng contributed to this story.