The U.S. has taken a drastic step in an attempt to control China’s technological dominance by releasing an executive order that restricts U.S. investment in several Chinese sectors. Rather humorously, the directive maintains a cryptic tone by alluding to ‘countries of concern’ only to reveal China as the sole focus at the end.

This move towards containment is explained on the grounds of national security, stating that the manufacture and development of military, surveillance, and cyber technology by China present a considerable threat to America’s safety. The severity of this situation led authorities to announce a national emergency, enabling decisive action under the International Emergency Economic Powers Act, the National Emergencies Act, and section 301 of title 3 of the United States Code, all without congressional consultation or endorsement.

The extensive document further notes that monetary and material support is crucial for the growth of such technologies and, despite the U.S.’s usual advocacy for open investment, the current circumstances necessitate an unwanted prohibition on investments that may contribute to this perceived hazard.

The proclamation did not furnish any reasoning for the prohibition of U.S. investments in Chinese conglomerates, other than the potential risk they pose to the U.S.’s position as the global military powerhouse. The increasingly formidable military faction in China is seen as a potential threat to U.S. national security, thereby raising questions about the world’s perception of the U.S.’s military capabilities.

Notably, the main sectors of scrutiny, reported by WSJ, will be semiconductors and quantum computing, primarily affecting the private equity and venture capital sectors. As the ban will be enforced in a year, U.S. retail investors might face challenges in investing in these sectors. Furthermore, these measures could persuade other countries to conform to the U.S.’s directives.

In response to this impending move, China’s state-controlled publication, Global Times, suggested such actions will likely harm U.S. domestic interests, potentially causing a rift with the rest of the world. The returns on these rigid actions are said to possibly delay China’s R&D advancement by a mere decade.

This increasing tension makes it challenging to foresee an end to such escalations. Will this executive order lead to further limitations on economic activities? How far will the U.S. go in aligning its interests with those of its allies? Prominent independent journalist Glenn Greenwald infers that there must be a limit to the support the U.S. can expect for its vaguely justified unilateral actions, which could potentially incite international resentment towards the country.