The order is expected to target US private equity, venture capital and venture capital investments in China in the areas of semiconductor manufacturing, supercomputing and artificial intelligence. (Source: ABC News)

The aim of the order is to block US capital and technology from accelerating the development of technologies that could aid China's military modernization and threaten US national security, the sources said.

The order is expected to target U.S. private equity, venture capital and venture capital investments in China in the areas of semiconductor manufacturing, supercomputing and artificial intelligence. Most of the sanctioned investments must be notified to the U.S. government, while some are banned outright.

“This order fills a gap in existing mechanisms,” said Cordell Hull, a former US Commerce Department official. “The US already has export bans on technology, or foreign investment in sensitive domestic technology industries.

This order will help close the funding and know-how gap, and help the federal government monitor capital flows into the technology sector.”

The restricted investments are expected to assess export control regulations on China issued by the US Commerce Department in October 2022, sources told Reuters .

The regulations are not expected to come into effect immediately and the government will listen to comments on the proposals, sources said.

The US government has been talking to relevant parties and consulting with allies. The issue was also raised during Treasury Secretary Janet Yellen's recent trip to China.

Washington is also trying to define what counts as artificial intelligence and control foreign investments by American companies and people, said Emily Kilcrease, a former federal official who worked on China investment policy.

She described the order as an important step in establishing a monitoring system that would allow the US to screen transactions to relevant countries. Before issuing the order, Washington also prepared for retaliation from Beijing.

A White House spokesman declined media requests for comment on the report.