The Treasury Department has implemented a new rule to prevent U.S.-based individuals and companies from investing in advanced technologies in China to prevent Beijing from accessing cutting-edge expertise and equipment. The rule, based on an executive order from President Joe Biden, focuses on semiconductors, microelectronics, quantum computing, and artificial intelligence systems. It will come into effect on January 2, prohibiting certain transactions and establishing reporting requirements.
Paul Rosen, assistant secretary for investment security, emphasized the importance of protecting national security by limiting investments that could be exploited for threatening purposes. However, China has condemned the rule and plans to defend its rights. Critics argue that the rule targets not only tangible transactions but also intangible benefits such as managerial capability and talent networks.
Stephen Ezell from the Information Technology & Innovation Foundation explained that the rule is a signal for U.S. entities to reconsider investments that could enhance China’s capabilities. Daniel Gonzales from RAND Corporation highlighted the rule’s focus on preventing U.S. investment firms from supporting Chinese firms in developing sensitive technologies.
The rule aims to prevent incidents like the collaboration between TikTok and Sequoia Capital, which led to the development of AI algorithms with potential military applications. Concerns about China’s offensive capabilities in quantum computing also drove the rule’s implementation to protect encryption codes and confidential information. Overall, the rule’s objective is to safeguard sensitive technologies and prevent their leakage to China through U.S. investments.
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