US Proposes Restrictions on Investments in Chinese Tech, AI

The United States Department of the Treasury has proposed a new rule that would restrict and monitor US investments in China for artificial intelligence, computer chips, and quantum computing. This move is part of a broader effort by the Biden administration to stymie the development of technologies by China that could give it a military edge or enable it to dominate emerging sectors.

US-China relations have been tense in recent years.

The proposed rule stems from President Joe Biden’s August executive order regarding the access that “countries of concern” have to American dollars to fund advanced technologies that could enhance those nations’ military, intelligence, surveillance, and cyber-capabilities. China, Hong Kong, and Macau were identified as countries of concern.

The Biden administration has sought to limit the development of technologies by China that could give it a military edge or enable it to dominate emerging sectors such as electric vehicles (EVs). In addition to the proposed rule, Biden has also placed a stiff tariff on Chinese EVs, an issue with political implications as Biden and his Republican presidential opponent Donald Trump are both trying to show voters who can best stand up to China, a geopolitical rival and major trading partner.

The proposed rule outlines the required information that US citizens and permanent residents must provide when engaging in transactions in this area, as well as what would be considered a violation of the restrictions. It specifically would prohibit American investors from funding AI systems in China that could be used for weapons targeting, combat, and location tracking, among other military applications.

AI systems have the potential to revolutionize many industries.

The US Treasury is seeking comment on the proposal through August 4 and after that is expected to issue a final rule. Biden administration officials, including Treasury Secretary Janet Yellen, have insisted they have no interest in “decoupling” from China, but tensions between the two nations have increased in recent years.

After the US military in February 2023 shot down a suspected Chinese spy balloon off the US East Coast after it traversed sensitive military sites across North America, China threatened repercussions. Since then, incidents between the two nations based on national security concerns have regularly occurred.

The suspected Chinese spy balloon incident heightened tensions between the US and China.

The proposed rule is part of a broader effort by the Biden administration to address the challenges posed by China’s rise. As the world’s second-largest economy, China’s technological advancements have the potential to reshape the global landscape. The US is seeking to ensure that its investments in China do not inadvertently contribute to the development of technologies that could be used against it.

China’s technological advancements have the potential to reshape the global landscape.

The proposed rule is a significant step in this direction, and its implications will be closely watched by investors, policymakers, and national security experts around the world.