On February 21, U.S. President Donald Trump signed the “America First Investment Policy memorandum” aimed at tightening restrictions on Chinese investments in the United States. The policy prioritizes American interests, limits Chinese access, and seeks to counter China in key economic sectors.
This marks the culmination of U.S. restrictions on China-U.S. investment that began in Trump’s first term, dealing a significant blow to China, which remains heavily reliant on U.S. technology.
Blocking China’s access to U.S. technology and capital
Section one of the Memorandum, “Principles and Objectives,” directly targets China, stating that since the 2019 trade war and global supply chain restructuring, “certain foreign adversaries, including the People’s Republic of China (PRC), systematically direct and facilitate investment in United States companies and assets to obtain cutting-edge technologies, intellectual property, and leverage in strategic industries. The PRC pursues these strategies in diverse ways, both visible and concealed, and often through partner companies or investment funds in third countries.”
The document highlights several actions taken by Trump during his first term, including: initiating a Section 301 investigation into China’s practices regarding forced technology transfer, unfair licensing, and intellectual property policies; and announcing the Department of Justice’s China Initiative to identify and prosecute trade secrets theft, hacking, and economic espionage.
On the principle of investment reciprocity: “Economic security is national security. The PRC does not allow United States companies to take over their critical infrastructure, and the United States should not allow the PRC to take over United States critical infrastructure. PRC-affiliated investors are targeting the crown jewels of United States technology, food supplies, farmland, minerals, natural resources, ports, and shipping terminals.”
On sweeping restrictions on Chinese investment in various sectors: “The United States will use all necessary legal instruments, including the Committee on Foreign Investment in the United States (CFIUS), to restrict PRC-affiliated persons from investing in United States technology, critical infrastructure, healthcare, agriculture, energy, raw materials, or other strategic sectors.”
Additionally, it introduces regulatory measures that could further limit Chinese capital from entering the U.S. financial market, such as environmental reviews, potentially reducing Chinese companies’ access to financing on American stock exchanges like Nasdaq.
The executive order’s mention of the need to “protect United States farmland and real estate near sensitive facilities” reflects a broader effort that began more than a decade ago, when the U.S. first started scrutinizing this unique aspect of Chinese investment and imposing restrictions.
In my analysis The Collision Between China’s Quest for Food and America’s Farmland Security, I examined why Washington views China’s large-scale farmland purchases as a national security concern. Since then, regulatory scrutiny has intensified.
According to a Wall Street Journal report published on Nov. 2, 2024, titled “U.S. to Expand National-Security Reviews of Real-Estate Deals Near Military Bases,” the Treasury Department began reviewing such transactions in July of that year and announced in November new regulations authorizing the Committee on Foreign Investment in the United States (CFIUS) to review real estate sales within one mile of 40 designated facilities and within 100 miles of 27 others.
By mid-December 2024, 40 U.S. states has introduced 215 legislative proposals restricting foreign ownership of land, with 164 specifically prohibiting or limiting property purchases by Chinese nationals.
Restrictions on U.S. capital investment in China
While the first section of the memorandum focuses on restricting Chinese investment in the U.S., the second section, particularly Clause J, imposes restrictions on U.S. investments in China: “This review will build on measures taken under my authority in 2020 and 2021 and consider new or expanded restrictions on United States outbound investment in the PRC in sectors such as semiconductors, artificial intelligence, quantum, biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas implicated by the PRC’s national Military-Civil Fusion strategy.”
To prevent U.S. investors from circumventing these restrictions, it states that “as part of the review, my Administration will consider applying restrictions on investment types including private equity, venture capital, greenfield investments, corporate expansions, and investments in publicly traded securities, from sources including pension funds, university endowments, and other limited-partner investors. It is past time for American universities to stop supporting foreign adversaries with their investment decisions, much as they should stop granting university access to supporters of terrorism.”
In other words, the memorandum places nearly all types of U.S. capital investment in China under restrictions, with specific industry limitations clearly outlined in Clause J.
Sharp decline in U.S.-China investment
From the 1980s to 2019, China and the U.S. have developed a three-tiered economic relationship: mutual trade partnerships, cross-border investments, and multi-layered financial cooperation. However, financial cooperation remained limited, as China never fully opened its markets, allowing only restricted operations for foreign banks.
Since the U.S.-China trade war began in 2019, bilateral trade and investment have steadily declined. While decline in trade has relatively small due to mutual economic dependencies, direct investment has shrunk dramatically. As of 2024, the U.S. remains China’s third-largest trading partner, following ASEAN and the European Union.
According to Chinese customs data, U.S.-China bilateral trade reached $633.52 billion in 2018, with China posting a surplus of $323.33 billion. By 2024, trade volume had risen slightly to $688.28 billion, with China’s surplus expanding to $361 billion. That means of China’s total trade surplus — roughly $1 trillion — more than one-third originates from the U.S.
Direct investment between the U.S. and China has sharply declined in recent years.
According to Statista, Chinese direct investment in the U.S. fell to $28 billion in 2023 after peaking at $38.8 billion in 2019, accounting for only 12.3% of total foreign direct investment (FDI) in the U.S. that year.
U.S. investment in China is also dropping. Data from China’s Ministry of Commerce show that American direct investment in China was $3.4 billion in 2023, or merely 1.8% of China’s total inbound FDI, down from $8.7 billion in 2020, or 5.3% of China’s total FDI, and a 75.7% decline from $14 billion in 2019.
Following the implementation of the memorandum, direct investment between the two countries is expected to plummet further.
Cutting off China’s access to U.S. advanced technology
Undoubtedly, Trump’s memorandum will have long-term implications for China’s technological development and industrial advancement.
First, the restrictions on external technological inputs could slow China’s progress in high-end manufacturing and frontier technologies. The U.S. remains the global leader in technological research and development, and many of the sectors targeted in Trump’s memorandum — such as technology, healthcare, and energy — are the same key industries China has sought to upgrade through overseas investments.
Restricting Chinese capital will reduce Chinese researchers' access to advanced technology, potentially creating bottlenecks for domestic companies. China remains highly dependent on U.S. technology in areas such as semiconductors, AI algorithms, and precision manufacturing equipment.
The memorandum effectively cuts off China’s ability to acquire American intellectual property through mergers, acquisitions, or direct investments, disrupting its innovation pipeline in the short term. While China may frame this external pressure as an opportunity to accelerate domestic innovation by pooling state and private resources, increasing R&D spending is inevitable.
Second, the U.S. policy may set a precedent for other countries. By portraying China as one of the countries which “systematically direct and facilitate investment in United States companies and assets to obtain cutting-edge technologies,” the memorandum reinforces concerns in the European Union, Japan, and South Korea.
If these countries follow Washington’s lead and implement similar investment screening mechanisms, it would further limit China’s participation in global technology cooperation and transfer. This could delay China’s industrial upgrades and weaken its position in global value chains.
With the U.S. facing a national debt of nearly $35 trillion and deep domestic political and economic divisions, Trump’s administration needs to prioritize domestic stability. The memorandum sets the tone of U.S.-China relations for the next four years: limited cooperation, high vigilance, and competition in critical industries.
U.S. Secretary of State Marco Rubio recently underscored this stance, stating, “China is a global power, the second largest economy in the world, rapidly growing military. We have to have relations with the Chinese... That said, we are not going to live in a world where we depend on China... a world in which China gets to dominate the Indo-Pacific.” His remarks are in line with my pre-election predictions about Trump’s China policy.
(The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views or positions of Radio Free Asia or GNS.)
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