The Biden administration has finalized restrictions on U.S. individuals and companies investing in China's advanced technologies, including semiconductors, quantum computing and artificial intelligence (AI). The new rules are designed to prevent U.S. capital and expertise from being used to help China develop key technologies for advanced science and technology.
The U.S. Treasury Department's official website issued a press release on Monday (October 28), announcing that the new rules, which have been under review for more than a year, prohibit U.S. individuals and companies from investing in certain sensitive industries, and others must be notified to the U.S. government.
Details of the restrictions
The final rule identifies the subset of national security technologies and products identified in the Departure Order that are subject to the regulation as:
Prohibited Transactions: Covered transactions related to certain electronic design automation software; certain manufacturing or advanced packaging tools; the design or manufacturing of certain advanced integrated circuits; advanced packaging technologies for integrated circuits; and supercomputers are prohibited.
Notifiable Transactions: Covered transactions related to the design, manufacturing, or packaging of integrated circuits that are not covered by the definition of prohibited transactions are subject to notification requirements.
2. Quantum information technology:
Prohibited Transactions: Covered transactions related to the development or production of quantum computers or any key components needed to produce quantum computers; the development or production of certain quantum sensing platforms; and the development or production of certain quantum networks or quantum communications systems.
3. Some artificial intelligence (AI) systems:
Prohibited Transactions: Covered transactions related to the development of any AI system designed or intended for use exclusively in certain end uses are prohibited. In addition, covered transactions related to the development of any AI system that uses computing power greater than 10ˆ25 computational operations for training, or that uses primarily biological sequence data and computing power greater than 10ˆ24 computational operations for training, are prohibited.
Notifiable Transactions: Covered transactions related to the development of any AI system not covered by the definition of prohibited transactions, where such AI system is: designed or intended for use in certain end uses or applications; or uses computing power greater than 10ˆ23 computational operations for training, are subject to notification requirements.
Paul Rosen, Assistant Secretary of the Treasury for Investment Security, said: "U.S. investments, including the management assistance that typically accompanies such capital flows, and intangible benefits such as investment and talent access, may not be used to help develop the military, intelligence, and cyber capabilities of countries of concern."
The final framework of the new rules will take effect on January 2, and is basically consistent with the proposal announced in June this year. The U.S. Treasury Department announced a new rule proposal on June 21 to restrict and monitor U.S. investment in China's artificial intelligence, computer chips and quantum computing fields; the proposal originated from the executive order issued by U.S. President Biden in August 2023, involving countries of concern (including mainland China, Hong Kong and Macao) receiving U.S. funding for advanced technology.
The final framework released on Monday local time further clarified the technical parameters and the U.S. government's expectations for relevant compliance.
The U.S. Treasury Department press release quoted a senior government official as saying that the regulation prohibits the United States from investing in Chinese companies focusing on advanced semiconductor technology, but only requires notification for Chinese companies focusing on traditional chips. The United States has restricted the export of advanced chips to China, and the Treasury Department's new investment rules are intended to supplement existing trade restrictions.
At the same time, the rules on AI investment depend not only on the computing power used to train the relevant AI system, but also on its intended use. The new rules prohibit US individuals and companies from acquiring shares in Chinese AI companies that focus on military applications. Some investments in AI models with other applications are prohibited, while others are subject to notification requirements.
Certain categories of capital flows are exempt, including publicly traded securities and some limited partnership investments. The above-mentioned US government official said that broadly speaking, the new rules are intended to capture a type of investment model identified in the 2023 report of the Washington think tank Center for Security and Emerging Technologies. Researchers found that Americans participated in 17% of global investment transactions in Chinese AI companies from 2015 to 2021; of these transactions, about nine out of ten were at the venture capital stage.
In addition, the US government has been lobbying G7 members to implement similar regulations, but there are also views that are cautious about this regulation because it is equivalent to directly restricting companies' overseas investment. A senior White House official said that "adjustments were made to gain support from multiple countries" and emphasized that considerations have been taken to avoid excessive restrictions.
The content of this article is integrated from Nikkei News, Lianhe Zaobao, Compliance Outlook, etc., and is for communication and learning purposes only. From chip list
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