US President Joe Biden has banned US high tech investments in China citing national security, as he signed an executive order to bring the move into effect.
After the new order, a government notification is required for funding in other sectors.
The sectors where the new order will be imposed are semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems.
In a letter to Congress, Biden said he was declaring a national emergency "in sensitive technologies and products critical to the military, intelligence, surveillance, or cyber-enabled capabilities" to thwart the threat of advancement by countries like China.
The new move by the Biden administration could reignite the tension between the two economic giants.
Republicans, the opposition camp, said the new order did not go far enough, The Guardian reported.
Despite praising the move, House foreign affairs committee chairman Michael McCaul said as quoted by The Guardian, "The failure to include existing technology investments as well as sectors like biotechnology and energy is concerning."
In response to the move, China has expressed its disappointment.
A spokesperson of the Chinese Embassy said, as quoted by The Guardian, the move will "seriously undermine the interests of Chinese and American companies and investors."
"China will closely follow the situation and firmly safeguard our rights and interests," he added.