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US Finalizes Rules to Restrict AI & Tech Investments in China

The Biden administration announced on Monday that it is finalizing rules to restrict US investments in certain technology sectors in China, focusing on AI, semiconductors, and quantum technologies that may pose national security risks. These regulations, initially proposed by the US Treasury in June and guided by President Joe Biden’s August 2023 executive order, take effect on January 2 and will be monitored by Treasury’s new Office of Global Transactions.

Treasury described these targeted technologies as essential for advancements in military, cybersecurity, surveillance, and intelligence applications. Paul Rosen, a senior Treasury official, stated that US investments, including indirect benefits like managerial support and access to talent networks, should not contribute to the development of adversarial nations’ military and cyber capabilities.

This move aligns with broader US efforts to prevent American expertise from aiding China’s advancement in critical technologies. Earlier this year, Commerce Secretary Gina Raimondo underscored the importance of such restrictions to prevent China’s military technology development. While the new rules allow investments in publicly traded securities, officials noted that prior executive orders already restrict dealings with certain designated Chinese firms.

Additionally, the House select committee on China has criticized US index providers for channeling American investment funds toward Chinese companies that allegedly support China’s military development.