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AMNA NAWAZ: The Biden 
administration released a 
long-awaited executive order

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today aimed at curbing 
China's military development. 
These new rules mark a first

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step by the U.S. government 
to clamp down on overseas 
investments by American firms.

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Laura Barron-Lopez 
has the story.

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LAURA BARRON-LOPEZ: The 
new executive actions limit 
investments in China by

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private equity and 
venture capital firms in 
three high-tech sectors,

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quantum computing, artificial 
intelligence, and semiconductors 
and microelectronics.

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It would also require firms 
to disclose investments in 
other Chinese industries

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not restricted under 
the president's order.

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Here to discuss is Chris 
Johnson. He had a 20-year 
career in the U.S. 
intelligence community,

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where he focused on China. 
Now he runs his own consulting 
firm, China Strategies Group.

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Chris, thanks so 
much for joining us.

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What is the significance of 
this executive order limiting

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American developments in China? 
And how will it be implemented?

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CHRISTOPHER JOHNSON, 
President and CEO, China 
Strategies Group: Well,

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I think its main significance 
is that it's finally managed 
to get out the door.

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This is something that 
the administration has 
been working on for nearly 
two-and-a-half years now of

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its tenure, and then, of 
course, if we count the 
time of basically the 
entire Trump administration,

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where they were also thinking 
about such an executive 
order and working on it then.

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So we're talking about a 
sum total of six-and-a-half 
years in the making.

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So it's quite significant 
in that regard. It's 
important as well, 
obviously, because it's the

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next step, really, in the 
process that we have seen 
under the Biden administration

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of trying to control Chinese 
ability to develop some of 
these core technologies,

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most specifically, things that 
might have military application, 
semiconductors, in particular.

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That's where the executive 
order is going to be the 
strictest in terms of

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actual prohibitions of 
investments, and then also these 
new and emerging technologies,

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of course, of artificial 
intelligence and quantum 
computing, as you said.

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LAURA BARRON-LOPEZ: 
The administration has 
made clear that these 
actions are meant to stop

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China from using U.S. technology 
to modernize their military 
and intelligence capabilities.

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How much American money is 
actually going to develop those 
technologies in China? And

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will these new restrictions 
actually impact China's ability 
to advance their technology?

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CHRISTOPHER JOHNSON: Yes.

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Well, on the scale of 
total investment that 
the Chinese are making in 
these core technological

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areas, the actual U.S. dollar 
flow into those investments 
is relatively small.

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The Chinese government, 
of course, is pouring 
a ton of money into all 
three of these areas,

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largely through its industrial 
policies, which are of 
great concern to the U.S.

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So, the actual amount 
of money, by comparison,

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that the U.S. is putting in 
is small. But it's not really 
the money necessarily that I

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think the administration 
and other folks who are 
looking at this closely, 
especially on the Hill,

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have been focused on. 
It's really the knowledge, 
the special capabilities,

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the sort of things that a U.S. 
venture capital or other firm 
can bring to the table in terms

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of expertise that might actually 
help the Chinese make advances 
in the technology itself.

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So, in other words, to 
facilitate making the investment 
that the U.S. investor

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is making profitable, they 
are willing to share their 
ecosystem, if you will,

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of technological and other 
expertise. And that's really 
what the concern is. So,

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while the actual dollar 
amount is small, that's 
been the concern.

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And in terms of the ability to 
impact Chinese developments, 
it certainly will not ease

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their ability to do so. One 
of the things that's been 
most challenging for them is,

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they want to obviously 
have access to foreign 
direct investment coming 
into these technologies,

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and especially those 
expertise categories that 
I mentioned a moment ago, 
coming their direction.

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They will continue, of course, 
to pursue these technologies, 
because they're critical,

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in their minds, for not just 
their military advancement, but 
also their economic development

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in the 21st century, because, 
obviously, these are the 
three core technologies

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that are looking like they 
will define the knowledge-based 
economy of this century.

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LAURA BARRON-LOPEZ: Senior 
administration officials 
told us today that it took a

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thoughtful and deliberative 
process to get to 
this executive order.

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Could you explain some of that 
process that they underwent 
to actually reach this point?

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CHRISTOPHER JOHNSON: 
Yes, absolutely.

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And I think the administration 
deserves a lot of credit for 
this. First of all, there was

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extensive consultation 
with affected parties, 
venture capital firms, 
other investing firms.

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And they took into 
account a lot of their 
feedback in the process.

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And, obviously, as the executive 
order tells us, there will 
be a comment period as well,

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which will be quite 
lengthy. So that will be 
another opportunity for the

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administration to engage 
with affected parties, 
most specifically industry 
and most specifically

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the semiconductor industry 
in the United States, because 
that's the institution that,

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as I mentioned earlier, will be 
the most affected, that sector.

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So they have taken 
a very judicious and 
deliberative approach. 
Some critics argue it's

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been too judicious and 
too deliberative, in the 
sense that the executive 
order only requires what

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they call a sort of 
notice-and-go system for 
areas that are not prohibited 
under the executive order.

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So, that is basically an 
entity wish - - a U.S. 
person entity wishing to

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make an investment has to report 
to the Treasury Department about

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what they're doing. But it's not 
a proper screening mechanism,

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like had been advanced earlier, 
especially in some possible 
congressional legislation,

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wherein they would have 
to screen that investment 
and decide whether it is 
allowed or prohibited.

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Instead, it is just a 
notification process. And 
some critics have said 
that is too -- too loose.

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LAURA BARRON-LOPEZ: How 
do you expect China to

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view these new restrictions? 
And is there wide expectation 
that they will retaliate?

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CHRISTOPHER JOHNSON: There 
definitely is. I think we 
should expect them to retaliate,

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in part because they have told 
senior U.S. officials that they 
will. When Secretary Yellen,

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our Treasury secretary, was 
visiting China, that message 
was definitely conveyed.

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It's been conveyed to 
Secretary of State Blinken 
and other senior U.S. 
officials. So the Chinese

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have made clear that this is 
one of many of the sort of red 
lines. In March of this year,

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President Xi Jinping at 
a -- in comments at a 
legislative session said 
that the United States

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and the West was acting 
actively to sort of suppress, 
contain and encircle China.

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And, since then, we have seen 
them take more deliberative 
retaliatory actions. So,

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one instance is the banning 
of sale of the semiconductor,

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U.S. semiconductor for Micron's 
chips to many Chinese customers. 
We have seen them react

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with restrictions on 
certain rare earth meddles 
that are critical in 
the semiconductor space.

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So, they have kind of 
shifted gears. We have seen 
a step change from this sort

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of largely rhetorical 
responses to actual 
retaliation that does matter.

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And I would expect to see 
something similar like 
that in this instance.

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LAURA BARRON-LOPEZ: 
Chris Johnson of China 
Strategies Group, thank 
you so much for your time.

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CHRISTOPHER JOHNSON: 
My pleasure. Thank you.