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US proposes New restrictions for investments in Chinese tech, AI

The United States Department of the Treasury has developed a proposed rule aimed at restricting and monitoring American investments in China’s artificial intelligence (AI), computer chips, and quantum computing sectors.

This detailed draft rule, released on Friday, follows President Joe Biden’s August executive order targeting “countries of concern,” particularly regarding their access to U.S. capital for developing advanced technologies. These technologies could potentially enhance these nations’ military, intelligence, surveillance, and cyber capabilities. The executive order specifically identifies China, Hong Kong, and Macau as countries of concern.

The Biden administration’s objective is to curb the advancement of Chinese technologies that could provide a military advantage or enable dominance in emerging sectors like electric vehicles (EVs). Additionally, Biden has imposed a significant tariff on Chinese EVs. This move holds political implications as both Biden, a Democrat, and his Republican opponent Donald Trump aim to demonstrate their ability to confront China, a key geopolitical rival and major trading partner.

The proposed rule details the information that U.S. citizens and permanent residents must disclose when conducting transactions in the targeted sectors and outlines what constitutes a violation of the restrictions.

Specifically, the rule would prohibit American investors from funding Chinese AI systems that could be used for military applications such as weapons targeting, combat, and location tracking, according to a senior Treasury official who briefed reporters on condition of anonymity.

The Treasury Department is seeking public comment on the proposal until August 4, after which a final rule is expected to be issued.

While Biden administration officials, including Treasury Secretary Janet Yellen, have emphasized that they do not intend to “decouple” from China, tensions between the two nations have risen in recent years.

An example of these tensions occurred in February 2023, when the U.S. military shot down a suspected Chinese spy balloon off the U.S. East Coast after it had flown over sensitive military sites across North America, prompting threats of retaliation from China.

Since then, national security concerns have continued to cause friction between the two countries. In May, Biden issued an order blocking a Chinese-backed cryptocurrency mining firm from owning land near a Wyoming nuclear missile base, citing the proximity as a “national security risk.”

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