The U.S. Treasury Department issued a new rule this week seeking to limit U.S. investments in China for military technology.
On Monday, the Treasury Department announced a new rule aimed at restricting and monitoring American investments in China’s artificial intelligence, semiconductor, and quantum computing sectors. The move is part of an effort to prevent the Chinese military from gaining an advantage in advanced technologies.
The Rule:
The new rule stems from an executive order issued by President Joe Biden in August 2023, aimed at curbing the flow of U.S. capital to “countries of concern,” including China, Hong Kong, and Macau. The order targets technologies with military applications, such as code-breaking and next-generation fighter jets. The restrictions are set to take effect on January 2.
Along with restricting investments, the rule mandates that U.S. individuals and companies report transactions involving “technologies and products that may contribute to a threat to the national security of the United States” to the federal government.
Violators could face fines of up to $368,136 or twice the value of the prohibited transaction, whichever is greater. The Treasury Department is establishing an Office of Global Transactions to enforce the new regulations.
The US Treasury Department building is seen in Washington, DC, January 19, 2023. On October 28, 2024, the Treasury Department announced a new rule limiting U.S. investments in China for military technology.
SAUL LOEB/AFP via Getty Images/Getty Images
Past Restrictions:
In May, Biden imposed steep tariffs on electric vehicles imported from China and introduced export controls to block Chinese access to advanced computer chips and the machinery needed to produce them.
Meanwhile, former President Donald Trump has pledged to sharply increase taxes on all Chinese imports if re-elected.
Before releasing the final version, the Biden administration consulted with businesses and U.S. allies for feedback.
Curtailing China’s high-tech ambitions is one of the few issues with strong bipartisan support in Washington.
Views:
In a statement, Paul Rosen, Assistant Secretary for Investment Security, said, “The Biden-Harris Administration is committed to protecting America’s national security and keeping critical advanced technologies out of the hands of those who may use them to threaten our national security. Artificial intelligence, semiconductors, and quantum technologies are fundamental to the development of the next generation of military, surveillance, intelligence and certain cybersecurity applications like cutting-edge code-breaking computer systems or next generation fighter jets. This Final Rule takes targeted and concrete measures to ensure that U.S. investment is not exploited to advance the development of key technologies by those who may use them to threaten our national security.”
“U.S. investments, including the intangible benefits like managerial assistance and access to investment and talent networks that often accompany such capital flows, must not be used to help countries of concern develop their military, intelligence, and cyber capabilities,” Rosen added.
This article includes reporting from the Associated Press.