US will ban American investment in some areas of China’s high-tech sector, including artificial intelligence, adding to strained relations between the two superpowers.

The US government will also ask US firms to disclose what investments they make in high-tech sectors in China.

Private companies now have more power to screen foreign dealings with the US government, thanks to the much-anticipated move.

As part of the measure, the US said it would target a narrow group of countries.

In spite of this, it is expected to further chill economic relations between the two largest economies in the world.

The Chinese government expressed disappointment.

Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said that the US has continuously escalated its suppression and restrictions on China.

According to him, US claims that it was not trying to hurt China’s economy or separate the two countries were inconsistent with its actions. As we ask the US side to honor its words, we urge them to do so.”

In a move formally launching the campaign to bar American companies from investing in companies operating in quantum computing, advanced semiconductors, and certain areas of artificial intelligence, US President Biden issued an order on Friday.

Additionally, US firms will be required to notify the Treasury Department if they invest in firms developing artificial intelligence and semiconductors.

These rules do not apply to portfolio investments, which are passive investments made through the stock market, but rather to active investments made by private equity, venture capital, and others.

They are now entering a public comment period, which should clarify which investments are prohibited. Several months will pass before the rules become effective.

A senior administration official told reporters the measure was a “national security action, not an economic measure”. According to them, the US remains committed to open investment.

As a senior fellow at the Atlantic Council, Sarah Bauerle Danzman said the approach described on Wednesday was narrower than some of the other proposals under consideration, but still represented an “unprecedented” expansion of government authority.

There is no doubt that it is a big deal, and it definitely represents a change from previous policy.