The Biden administration has announced the finalisation of new rules aimed at limiting American investments in China’s artificial intelligence, semiconductor, and other advanced technology sectors that could pose a threat to US national security. The rules, which will take effect on 2nd January 2025, form part of a broader strategy to curtail China’s access to critical technologies.

The new regulations focus on three core areas: semiconductors and microelectronics, quantum information technologies, and specific AI systems. These sectors, according to the US Treasury Department, are critical to next-generation military applications, cybersecurity tools, and intelligence operations.

Some key restrictions
The regulations stem from an executive order signed by President Joe Biden in August 2023, following a proposal from the Treasury in June.

The oversight of these investments will fall under the Treasury’s newly established Office of Global Transactions, which aims to ensure that American capital does not inadvertently assist the military, cyber, and intelligence capabilities of countries deemed a national security concern. Paul Rosen, a senior Treasury official, emphasised that beyond direct investment, other intangible benefits — such as managerial guidance and access to networks of talent and expertise — should not be allowed to benefit China’s military advancements.

The rules do include exceptions for publicly traded securities, meaning US investors can still participate in open markets. However, Treasury officials noted that previous executive orders already bar Americans from buying or selling shares in certain Chinese companies linked to military development. The House Select Committee on China has criticised major American financial institutions for directing large investments into such companies, which the US government believes are aiding China’s military build-up.

Stopping US technology from getting into the Chinese military
Commerce Secretary Gina Raimondo underscored the importance of these new rules earlier this year, emphasising that they are necessary to stop China from using US expertise to develop military-grade technologies. The new regulations are part of the administration’s broader effort to limit China’s technological growth and prevent it from dominating global markets in areas like semiconductors and AI.

These measures align with ongoing US concerns about China’s increasing capabilities in surveillance, quantum computing, and next-gen military technology. By restricting investment, the US hopes to curb China’s technological advancements and maintain a competitive edge in global markets.

Tightening the grip on tech investments
The new rules reflect the growing tension between Washington and Beijing, as the US seeks to protect its interests by limiting the flow of capital and expertise into strategic Chinese industries. Although the restrictions aim to curb direct military-related investments, they signal a broader shift in how the US handles economic engagement with China in critical sectors.

With the rules now finalised, the administration is sending a clear message that safeguarding national security takes precedence over business interests. As the regulations take effect in January, the US government’s focus will be on ensuring compliance and preventing American investments from contributing to China’s strategic ambitions.