Potential Outbound Screening Tool Would Restrict Investments in 'Specific' Tech, Yellen Says

The U.S. is still “considering” a new outbound investment screening regime, Treasury Secretary Janet Yellen said this week, stressing that any restrictions would be “narrowly scoped and targeted to clear objectives.”

Yellen, delivering a speech April 20 on U.S.-China economic relations, said the outbound investment screening “program” would aim to “restrict certain U.S. outbound investments in specific sensitive technologies with significant national security implications.” Yellen said the U.S. wants any outbound investment tool, as well as sanctions and export controls, “calibrated to mitigate spillovers into other areas.”

Yellen’s comments came after months of speculation the U.S. is close to issuing an executive order to set new guardrails on U.S. investments in China (see 2302140083 and 2303090061). Although Yellen didn’t specify how narrow the potential program could be -- including whether it would look to block investments in several sensitive Chinese sectors, such as advanced semiconductors, artificial intelligence and quantum computing (see 2302280011 and 2301120035) -- she did say the U.S. needs to first make sure it can properly implement any new restrictions.

It's “vital that these tools are easily understood and enforceable,” she said at the Johns Hopkins School of Advanced International Studies. “They must also be readily adaptable when circumstances change.” Yellen also said the U.S. will “engage and coordinate with our allies and partners in the design and execution of our policies” when “possible.”

“Communication is essential to mitigating the risk of misunderstanding and unintended escalation,” Yellen said. “When we take national security actions, we will continue to outline our policy reasoning to other countries. We will listen and address concerns about unintended consequences.”

Although she said the U.S. will “assert ourselves when our vital interests are at stake,” the administration isn’t looking to “decouple” from China. “A full separation of our economies would be disastrous for both countries,” Yellen said. “It would be destabilizing for the rest of the world.”

The “health” of the Chinese and U.S. economies is “closely linked. A growing China that plays by the rules can be beneficial for the U.S.,” she said, adding it could lead to “rising demand for U.S. products and services.”

“Some see the relationship between the U.S. and China through the frame of great power conflict: a zero-sum, bilateral contest where one must fall for the other to rise,” Yellen said. “President [Joe] Biden and I don’t see it that way. We believe that the world is big enough for both of us.”