The U.S. Treasury, which first proposed these measures in June 2023, drafted them under the directive of an executive order signed by President Joe Biden in August
The Biden administration is set to finalise new regulations aimed at limiting U.S. investments in China’s artificial intelligence and high-tech sectors, effective from January 2. Announced on Monday, the rules are designed to safeguard U.S. national security by restricting American capital from supporting technological advancements in China that could potentially bolster its military or intelligence capabilities.
The U.S. Treasury, which first proposed these measures in June 2023, drafted them under the directive of an executive order signed by President Joe Biden in August. This order targets three strategic sectors: semiconductors and microelectronics, quantum information technology, and certain artificial intelligence systems. The regulations will be managed by the Treasury’s newly established Office of Global Transactions.
According to the Treasury, the rules address a “narrow set of technologies” deemed crucial for the next generation of military, cybersecurity, surveillance, and intelligence applications. Senior Treasury official Paul Rosen highlighted the importance of ensuring that “U.S. investments, including intangible benefits like managerial assistance and access to investment and talent networks that often accompany such capital flows, must not be used to help countries of concern develop their military, intelligence, and cyber capabilities.” This includes restrictions on technologies potentially contributing to advanced military systems, such as “cutting-edge code-breaking computer systems or next-generation fighter jets.”
Commerce Secretary Gina Raimondo also expressed support for the new regulations earlier this year, stating that the rules are essential to curb China’s development of military-related technology. This move is part of a broader strategy by the U.S. to prevent American expertise from assisting China in establishing dominance in high-tech industries worldwide.
The new rules contain an exemption allowing U.S. investment in publicly traded securities. However, the Treasury clarified that the U.S. already has authority under prior executive orders to restrict investments in specific Chinese firms designated as national security risks.
There has also been growing concern in Congress, with the House Select Committee on China criticising major American index providers for directing billions of dollars from U.S. investors towards Chinese firms. The committee contends that such investments are inadvertently funding companies linked to China’s military development, raising alarms over the potential national security implications.
By implementing these rules, the Biden administration aims to maintain a delicate balance: safeguarding national security interests while avoiding unnecessary economic confrontation with China. The coming months will test the impact of these measures as they shape U.S.-China relations in the technology sector.
