WASHINGTON, Thursday, June 27, 2024 – The Biden administration is moving forward with plans to restrict US investments in China, particularly those related to semiconductors, quantum computing, and artificial intelligence.
The goal is to hinder China’s advancements in technologies critical to national security.
The Treasury Department unveiled proposed rules on Friday that would limit outbound investment in technologies deemed essential “for the next generation of military, intelligence, surveillance or cyber-enabled capabilities that pose national security risks to the United States.”
See Page 2 of the report in PDF.
These restrictions, under development for over a year, align with President Joe Biden’s strategy of slowing China’s progress in sensitive technologies that could threaten US security.
A year ago, Treasury Secretary Janet Yellen emphasized that planned investment controls would be targeted and complement existing export controls. Announced in October 2022, those restrictions escalated tensions in the US-China tech war by blocking the sale of advanced semiconductors and related technology to China.
On Friday, the Treasury Department released a Notice of Proposed Rulemaking, detailing the plan further. This is one of several steps following an executive order issued last August. No timeline for finalizing or implementing the rules was provided.
The proposal highlights the US government’s increasing focus on artificial intelligence. A senior Treasury official, speaking to reporters on Friday, stressed the administration’s aim to prevent China from developing AI applications for weapon targeting or mass surveillance through location tracking.
Public comments on the proposal will be accepted by the Treasury Department until August 4th. Here are some key details:
Affected investments under the proposed restrictions include equity acquisitions, convertible debt financing, greenfield investments, joint ventures, and certain limited partnership investments in non-US funds.
The rules would either prohibit or require notification for transactions involving sectors such as semiconductors and microelectronics, quantum information technologies, and artificial intelligence systems.
For AI, the proposal offers alternatives to a complete ban, involving limitations on computing power and the type of data used to train AI systems. Violations could result in civil penalties or referrals to the Justice Department for potential criminal prosecution.
The proposal also outlines exemptions for certain transactions, including those involving publicly traded companies, investments exceeding a specific size, and full ownership buyouts.
While a bipartisan effort in Congress to restrict outbound investment stalled late last year due to disagreements on the approach, a working group convened by Speaker Mike Johnson aims to reach a consensus by March. This group has yet to propose new legislation.
