US proposes new rule to curb AI investments in China

US proposes new rule to curb AI investments in ChinaUS proposes new rule to curb AI investments in china.

In this post:

  • The US Treasury Department has proposed a new rule to limit AI financing in China.
  • The new rule also covers investments in semiconductors and quantum computing.
  • The US says it has no interest in decoupling from China, but the new rule advances its national security.

On Friday, the United States Treasury Department proposed a new rule to curb and oversee critical US investments in China. The rule specifically focuses on artificial intelligence (AI), computer processors and silicon chips, and quantum computing.

The new rule is in line with President Joe Biden’s executive order, which he issued last August. According to the Associated Press, the executive order refers to “countries of concern,” specifically those who have access to US funds. 

Also read: China offloads $74 billion in U.S. treasuries over seven months

The US government has a stance that these funds could be used to enhance the military, cyber, surveillance, and intelligence capabilities of the concerned countries. According to the executive order, the countries of concern include Hong Kong, Macau, and China.

Biden administration wants to limit AI investments in China

The Biden administration has attempted to hinder the technological development of China with the executive order, said the report. It is important to note that China is the world’s second-largest economy, and technological development could help it have an upper hand in military capabilities. Gaining an edge in other sectors, such as electric vehicles, is also a concern for the United States. Assistant Secretary of the Treasury for Investment Security, Paul Rosen, said that,

“This proposed rule advances our national security by preventing the many benefits certain US investments provide beyond just capital.”

He added that “supporting the development of sensitive technologies in countries that may use them to threaten our national security.” Along with the newly proposed rule, the Biden administration has also imposed hefty tariffs on Chinese electric vehicles, solar cells, and batteries. 

The report notes that the decision has political implications, but it prevents US industries from unfairly subsidized competitors. It argues that Democrat Biden and Republican Trump are both trying to win voters’ confidence by showing who can better deter China. The report notes that China is a US rival but also an important trading partner.

The US has no interest in decoupling from China

The proposed rule clearly details the required information that US citizens and permanent residents must provide before engaging in any such deals. It also outlines the acts that would be considered as violations of the rule.

The news agency also reported an unnamed source from the Treasury Department saying that the rule would prohibit US investors from investing in AI systems in the People’s Republic of China. The source who previewed the rule for reporters firsthand said the AI systems could be used for combat and location tracking, weapon targeting, or other military purposes.

Also read: Russia and China vow to stand together against U.S.

The Treasury Department is seeking comment on the proposal until August 2024, after which it is expected to issue a final rule. Treasury Secretary Janet Yellen has insisted that the United States has no interest in “decoupling” from China; however, relations between the two countries have been strained in recent years. 

In May this year, President Biden also issued an order to stop a cryptocurrency mining firm from owning land near a nuclear missile base in Wyoming. The mining company was also backed by China, whose proximity to the base was considered a national security risk.

According to the New York Times, Senator Bob Casey said, “When we allow American companies to invest in sectors like AI and semiconductors in China, we’re putting our national security and our economic future at risk.”

Cryptopolitan reporting by Aamir Sheikh

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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