Artificial Intelligence & Machine Learning , Next-Generation Technologies & Secure Development , Standards, Regulations & Compliance

US Treasury Moves to Limit Investments in Chinese Tech Firms

New Rule Would Restrict Americans From Investing in Chinese AI, Semiconductors
US Treasury Moves to Limit Investments in Chinese Tech Firms
The public has until Aug. 4, 2024, to provide feedback on proposed U.S. Department of the Treasury rules to enact a ban on investment into Chinese cutting-edge technology. (Image: Shutterstock)

The U.S. Department of Treasury is moving forward with federal plans to restrict U.S. investments in Chinese companies that develop emerging technologies such as artificial intelligence, semiconductors and quantum information technology.

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The agency published notice of proposed rule-making Friday that would prohibit Americans from investing in companies that develop certain AI systems, quantum computers and other sensitive technology in "countries of concern." The proposed rule identifies the People's Republic of China, Hong Kong and Macau as countries that pose a national security threat to the United States due to their aims "to develop sensitive technologies and products critical for military, intelligence, surveillance, or cyber-enabled capabilities."

President Joe Biden signed an executive order in August 2023 that directs Treasury to begin the rule-making process toward restricting U.S. investments in certain Chinese technologies. White House officials told reporters at the time that the goal was to "prevent the People's Republic of China from obtaining and using the most advanced technologies to promote military modernization and undermining U.S. national security" (see: US Restricts Investment in Chinese AI, Other Technologies).

The administration has taken a series of actions to establish and enhance restrictions on U.S. investments that finance certain Chinese technology companies.

The proposed rule would prohibit Americans from conducting certain transactions with covered foreign citizens and restrict investments in entities that are directly or indirectly majority-owned by any person or organization in a country of concern. It allows for some exceptions for publicly traded securities, certain limited partner investments, buyouts of ownership from countries of concern, and third-country measures, among others.

Americans can also seek exemptions to the restrictions "on the basis that a transaction is in the national interest of the United States."

"Certain United States outbound investments may accelerate and enhance the successful development of sensitive technologies and products by countries of concern that develop them to counter United States and allied capabilities," the rule states.

The restrictions would apply to three categories of national security technologies - semiconductors and microelectronics, quantum IT and AI - and require Americans to notify Treasury of certain other transactions involving "technologies and products that may contribute to the threat to the national security of the United States."

Treasury is seeking public feedback on the proposed restrictions. Stakeholders have until August 4 to submit comments on the implementation of the executive order.

About the Author

Chris Riotta

Chris Riotta

Managing Editor, GovInfoSecurity

Riotta is a journalist based in Washington, D.C. He earned his master's degree from the Columbia University Graduate School of Journalism, where he served as 2021 class president. His reporting has appeared in NBC News, Nextgov/FCW, Newsweek Magazine, The Independent and more.

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