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"The aim would be to block investment in only the most sensitive industries, such as defence, police it rigorously in important ones, such as technology, and otherwise step back." What does "otherwise step back" imply here?

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In this sentence, "step back" is the third of three actions listed - the first being "block investment" and the second being "police it rigorously".

In the final context of this sentence, it means that regulators, or whoever is controlling this investment, will "step back" from the controls it is placing in the other two actions listed in the sentence. This will allow investment to occur free of the restrictions placed on the other two categories.

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