President Biden issued a new executive order on Thursday barring Americans from investing in Chinese firms linked to the country’s military or engaged in selling surveillance technology — both inside and outside of China — used to repress dissent or religious minorities.
The new order, which initially lists 59 Chinese firms, substantially expands an order issued in November by President Donald J. Trump. By rewriting that earlier order to include firms engaged in making and deploying the surveillance technology — used against Muslim minorities like the Uigurs and dissidents in Hong Kong and in the Chinese diaspora around the globe — it intensifies a commercial and ideological battle between Beijing and Washington, one that Mr. Biden has termed the struggle between “autocracy and democracy.”
The move comes at a moment when China is both ramping up its ability to spy on its nearly 1.4 billion people, using a mix of facial-recognition cameras and software, phone-scanners and a range of other tools, and exporting that technology to nations around the world. It is often sold abroad as part of a package of communications equipment provided by companies like Huawei, or as part of China’s Belt-and-Road initiative, which aims to expand the country’s trade ties.
Mr. Biden’s aides said the move was justified by a new American commitment not to facilitate Chinese repression and human rights abuses.
But China regularly decries such moves as interference in its domestic affairs, and in the past has sought to retaliate with bans on American companies, leading to fears of broad economic decoupling between the world’s two largest economies. And the Chinese will likely argue that the United States and other countries use some of the same technologies and techniques to track terrorists and drug lords.
It is unclear how effective Mr. Biden’s order will be at stopping the spread of Chinese espionage technology. To make the investment ban truly effective, he would have to convince the European allies, Japan and South Korea, among others, to join in the effort.
That effort may begin next week. How to handle China is expected to be a major subject when Mr. Biden goes to the Group of 7 summit in Britain next week, followed by a meeting of NATO allies. It will be his first foreign trip as president. But in the preparations for the meeting, he is already running into resistance from nations that, like Germany and South Korea, rely on China as one of their biggest export markets for luxury cars, software and electronics.
As described by senior administration officials on Thursday, the new order will prohibit American companies and companies based in the United States from investing in the stock of publicly listed Chinese companies on the list or in debt issued by those firms. The ban will extend to investing in funds that, in turn, invest in those companies. Those funds will have a year to unwind their investments.
The new executive order is another example of a case in which the Biden administration is building on a Trump-era China initiative. Mr. Biden has also kept tariffs on Chinese goods in place, as leverage in negotiations. In this case, Biden administration officials say they were acting in part to fix the executive order issued last November, which they say was badly written and has been challenged, successfully, in American courts because it did not clearly lay out the factual basis for banning investments in Chinese firms linked to the defense industry.
Under the new executive order, the list of Chinese firms affected by the ban will be put together by the Treasury Department, which has long experience in issuing sanctions, rather than by the Pentagon.