U.S. Finalizes Rules to Curb AI and Tech Investments in China

The Biden administration announced on Monday that it is finalizing new rules to restrict U.S. investments in key Chinese technology sectors that could potentially pose a threat to American national security. These restrictions, effective from January 2, 2024, limit investments in certain areas of artificial intelligence (AI), quantum information technologies, and semiconductors and microelectronics. The U.S. Treasury will oversee these regulations through its recently established Office of Global Transactions.

Key Technologies Targeted

The rules, stemming from an executive order signed by President Joe Biden in August 2023, are part of a broader effort to curtail U.S. assistance in the development of China’s military, cybersecurity, surveillance, and intelligence systems. According to Treasury officials, the restricted technologies encompass:

• Advanced code-breaking computer systems

• Next-generation fighter jet capabilities

• Emerging AI applications that could be applied to military and surveillance use

Paul Rosen, a senior official at the U.S. Treasury, highlighted the importance of these restrictions, stating that U.S. investments often come with intangible benefits like managerial assistance and access to talent networks. These factors, he explained, should not be leveraged to enhance the military, intelligence, and cybersecurity abilities of “countries of concern” like China.

The Strategic Implications for U.S.-China Relations

The new regulations build on the U.S.’s strategy to limit technology transfers to China, aligning with efforts by Commerce Secretary Gina Raimondo, who stressed that these measures are vital to protect against the development of military-focused technologies in China. The carve-out—an exemption within the rules—allows for U.S. investments in publicly traded securities, while restrictions from previous executive orders already bar investments in specific Chinese companies with known ties to the military sector.

The House select committee on China has previously criticized American index providers for channeling significant U.S. investment funds into Chinese firms that, in the government’s view, contribute to the expansion of China’s military and technology dominance on the world stage.

Looking Ahead

These finalized restrictions underscore an ongoing shift in U.S. policy aimed at reducing technological and financial support to sectors in China that could bolster its military advancements. This approach reflects a heightened caution among U.S. policymakers about American investment influence and the potential national security risks of advancing adversarial technologies. As the rules take effect in early 2025, U.S.-China tensions around technology and military power are likely to intensify, with broader implications for global technology markets and international relations.