The US Treasury Department has announced a proposed rule to limit and monitor American investments in China, focusing on areas like artificial intelligence (AI), computer chips, and quantum computing. This move follows an executive order from President Joe Biden in August 2023, aimed at restricting the flow of American money into technologies that could boost China’s military and intelligence capabilities.
The executive order targets China, Hong Kong, and Macau as “countries of concern.” The Biden administration wants to prevent China, the world’s second-largest economy, from developing technologies that could give it a military advantage or help it dominate emerging industries such as electric vehicles (EVs).
Additionally, President Biden has imposed a heavy tariff on Chinese electric vehicles. This action is part of a broader political strategy as both Biden and former President Donald Trump compete to show voters who can better stand up to China, which is both a geopolitical rival and a major trading partner.
The proposed rule details the information that US citizens and permanent residents must provide when investing in these sensitive areas. It also specifies what would be considered a violation of the restrictions. For example, American investors would be prohibited from funding AI systems in China that could be used for military purposes like weapons targeting, combat, and location tracking. This was explained by a senior Treasury official who discussed the rule anonymously.
J. Philip Ludvigson, a partner at the law firm King & Spalding and a former Treasury official, said that the new details help companies and investors understand what will be expected of them. He emphasized that the private sector will have to handle much of the due diligence and compliance required for new investments.
Craig Allen, president of the US-China Business Council, expressed support for the Biden administration’s efforts to protect US national security while maintaining strong commercial ties with China. He highlighted the importance of these measures for American companies, workers, and the economy.
The Treasury Department is seeking public comments on the proposal until August 4, 2024. After considering these comments, they plan to issue a final rule. Despite these new measures, Biden administration officials, including Treasury Secretary Janet Yellen, have stated that they do not intend to “decouple” from China. However, tensions between the two countries have increased in recent years.
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One notable incident occurred in February 2023, when the US military shot down a suspected Chinese spy balloon off the Carolina coast. The balloon had flown over sensitive military sites across North America, leading to threats of retaliation from China. Since then, national security concerns have led to regular incidents between the two nations.
For instance, in May 2023, President Biden issued an order preventing a Chinese-backed cryptocurrency mining firm from owning land near a nuclear missile base in Wyoming, citing national security risks. This example underscores the growing strain in US-China relations and the ongoing efforts to safeguard American security interests.
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