Looming U.S. Investment Restrictions on China Threaten Diplomatic Outreach

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“They’re going to have concerns about our investment policies toward China,” said Mark Sobel, a former longtime Treasury Department official who is now the U.S. chairman of the Official Monetary and Financial Institutions Forum. “The Chinese have their issues with us, and both sides have a pretty clear understanding that there’s tension.” U.S.-Chinese relations have recently been pushed to their weakest point in years. Tensions have flared over the flight of a Chinese surveillance balloon over the United States, tougher restrictions on technology from Washington, Beijing’s partnership with Moscow during the war in Ukraine and China’s continued threatening of Taiwan. In recent months, the Biden administration has been working to halt a further decline in the relationship, which it sees as a potential threat to global peace and stability. In addition to Ms. Yellen, Secretary of State Antony J. Blinken visited Beijing last month and John Kerry, President Biden’s special envoy for climate change, is heading there on Sunday. But new investment restrictions from the United States could escalate the tit-for-tat measures that the two countries have been deploying just as they are trying to set a “floor” under their relationship. The new measures seem to have been largely settled for many months now. But the Biden administration appears to have delayed announcing them given the tumultuous relationship with China. Some of the details also continue to be debated by U.S. government agencies. Once the restrictions are proposed, the private sector will have time to comment on the limits, which could shape how they are put in place.