The British government is considering tightening rules on investment in China after the US president announced new measures aimed at limiting the dollars and expertise flowing into sensitive technologies in the country. Joe Biden signed an executive order on Wednesday that authorises the US treasury secretary to prohibit or restrict US investments in Chinese entities in three sectors: semiconductors and microelectronics; quantum information technologies; and certain artificial intelligence systems. The US government has said the measures are designed to address national security risks. China said on Thursday it was gravely concerned by the move. Rishi Sunak is considering following Biden’s lead and restricting outbound investment into China, and is discussing the matter with businesses, according to a Financial Times report. A spokesperson for the British government said on Thursday that the executive order gave important clarity on the US approach: “The UK will consider these new measures closely as we continue to assess potential national security risks attached to some investments.” The European Commission has said it will also closely scrutinise the US decision and had already started a review of its approach to outward foreign investment. In March, Ursula von der Leyen said in a speech that the European Commission needed to review its investment agreements with China in the light of its “explicit fusion of its military and commercial sectors”. Neither the UK nor the EU are expected to immediately follow the US, the Guardian understands. The US measures come at an increasingly tense time for economic and defence policy between its allies and China. While Biden’s administration already has powers to screen inward investment through the Committee on Foreign Investments in the United States (CFIUS) it does not have the same oversight of overseas investments by US-based firms and citizens. “The aim of an outbound investment screening programme is to close this gap in understanding,” said Kimberly Donovan, director at the Atlantic Council thinktank and a former senior US financial crime official. The new rules will also limit the transfer of intellectual property to China alongside investment deals, she said, adding that the US government would need additional resources to manage extra reports and queries from businesses. Biden’s move, which was met with muted reaction in the stock market, comes amid jitters over the state of the Chinese economy, after official figures this week showed that it had fallen into deflation for the first time in more than two years. Prices declined 0.3% year on year in July, while the country’s imports and exports fell more than expected. The UK and the US have both tried to rebuild ties with China after relationships soured in recent years. Economic and security concerns have developed into a tit-for-tat trade and investment battle in areas such as electric vehicles and advanced computing developments. The alleged human rights abuses of Uyghur Muslims in Xinjiang, including forced labour, and the importance of this region’s role in global supply chains have also added to scrutiny of trade with China. London’s ties with Beijing were put under strain after the imposition of restrictive security rules that have severely cramped the freedoms of Hong Kong’s citizens. The UK foreign secretary, James Cleverly, set out Britain’s new approach in April, saying it would seek to protect itself by limiting national security threats posed by China while engaging in areas such as trade, investment and the climate crisis. Still, businesses have bumped up against the British government’s position. On Sunday, a senior executive at HSBC apologised after calling the UK government “weak” for caving into US government demands that it follow its lead with a hostile approach to doing business with China. Sir Sherard Cowper-Coles, the bank’s head of public affairs and a former British diplomat, said he was sorry after “sharing his personal views” on Britain’s policy towards Beijing at a private event. Sunak and Biden signed an agreement to strengthen the historical security alliance between the UK and US in June, vowing to deepen economic ties in areas such as advanced technologies, clean energy and critical minerals.