The Biden administration has finalized restrictions on investments by U.S. individuals and companies in advanced Chinese technology. (Al Drago/Bloomberg News)
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The Biden administration has finalized restrictions on investments by U.S. individuals and companies in advanced Chinese technologies such as semiconductors, quantum computing and artificial intelligence.
The rule, enacted after more than a year of deliberations, prohibits investments in some of these industries and requires notification of others to the U.S. government. The goal is to prevent U.S. capital and know-how from collaborating on developing critical technologies that could give Beijing a military advantage.
Undersecretary of the Treasury Paul Rosen said, “U.S. investments help develop the military, intelligence, and cyber capabilities of countries of concern, including the intangible benefits that come with these capital flows, such as management support and access to investment and talent networks.” It must not be used to support.” Secretary of Investment Security said in a press release.
The final framework, which will take effect on January 2, is broadly consistent with the proposals announced in June and further clarifies the U.S. government’s expectations regarding the rule’s technical parameters and compliance.
Related: U.S. officials finalize tariffs on China, announced by Biden in May
One senior administration official said the rule bans U.S. investment in Chinese companies focused on advanced semiconductor technology, but it does not allow for a focus on so-called legacy chips, older-generation components essential to a wide range of electronics. He said that he is only requesting notification of investments made in Chinese companies that have received funding. The United States already restricts exports of advanced chips to China, and the investment rules are designed to complement those existing trade restrictions.
Regulations regarding AI investments will depend on both the computing power used to train the AI system in question and its intended use. The rule prohibits U.S. individuals and companies from acquiring stakes in Chinese AI companies focused on military applications. Investing in AI models using other applications may be subject to prohibitions or notification requirements.
There are exemptions for certain categories of capital flows, such as investments in listed securities and certain limited partners. Broadly speaking, the official said, the rules are aimed at capturing investment patterns like those identified in a 2023 report by the Center for Security and Emerging Technologies, a Washington-based think tank. Researchers found that between 2015 and 2021, Americans participated in 17% of global investment deals with Chinese AI companies. About 9 out of 10 of those deals were at the venture capital stage.
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