US tightens tech investment rules for China
The Biden administration has implemented restrictions on US investments in advanced technology sectors in China, such as semiconductors, quantum computing, and artificial intelligence.
The new rules aim to restrict American investments in certain industries in China to prevent the transfer of critical technologies that could enhance China’s military capabilities.
US investments should not be used to support the development of military, intelligence, and cyber capabilities in countries of concern, stated Paul Rosen, assistant Treasury secretary for investment security.
The new framework, effective Jan. 2, closely aligns with the June proposal, providing more details on the technological aspects and compliance expectations.
American investment in Chinese firms specialising in advanced semiconductor technologies is prohibited, while notification is required for investments in companies focusing on older-generation components known as legacy chips. These rules complement existing trade restrictions on advanced chip exports to China.
Chinese Foreign Ministry spokesman Lin Jian strongly condemned the US restrictions and stated that China will take necessary actions to protect its rights and interests. The regulations on AI investments are based on the computing power and intended use of the AI system.
The rule prohibits American individuals and companies from investing in Chinese AI firms specialising in military applications, while investments in AI models for other purposes may be subject to restrictions or notification requirements.
Certain capital flows are exempt from the rule, such as publicly traded securities and limited-partner investments. The rule aims to target investment trends highlighted in a 2023 report by the Center for Security and Emerging Technology.
The report revealed that Americans were involved in 17 per cent of global investment transactions with Chinese AI companies from 2015 to 2021, with about 90 per cent of these deals occurring at the venture capital stage.
Attribution: Bloomberg & US Department of Treasury
Subediting: Y.Yasser
