US restricts AI investment in China to further protect technological advantage

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US restricts AI investment in China to further protect technological advantage

The Biden administration recently announced finalized restrictions on investments in key technologies such as Artificial Intelligence (AI) from China, aimed at preventing these technologies from posing a threat to U.S. national security. These new regulations target specific technology sectors and are expected to take effect on January 2, 2025. Oversight will be carried out by a new Global Markets Office established by the U.S. Treasury Department.

National Security First: U.S. Strengthens Control on AI and Technology Investments from China

The U.S. Department of the Treasury proposed this new regulation in June, which was officially implemented by President Biden through an executive order in August 2023. The regulation focuses on three key areas, including semiconductor and microelectronic technology, quantum information technology, and certain AI systems, all of which are crucial foundations for next-generation military, cybersecurity, surveillance, and intelligence applications.

Scope of Impact: Highly Sensitive Technologies Become the Focus of Control

The U.S. Department of the Treasury emphasizes that these restrictive measures apply only to a small subset of core technologies, but their impact is significant. Senior officials at the Treasury Department pointed out that these technologies involve "cutting-edge cryptographic computing systems or next-generation combat aircraft," among other military applications. Rosen also added that intangible resources brought by U.S. investments, such as management assistance, investment, and connections to talent networks, should not be used to help other countries, especially China, in developing military, intelligence, and cyber capabilities.

Preventing Technology Outflow: U.S. Further Protects Technological Advantages

These restrictive measures are part of the U.S.'s efforts to prevent technology outflow and maintain global technological superiority. In the first half of the year, Commerce Secretary Gina Raimondo stated that the regulations play a crucial role in suppressing China's development of military technology. The U.S. government aims to prevent its own technological knowledge and resources from being used to enhance China's competitive advantage in the global market, particularly in the field of military technology.

Exceptions and Exemptions: Chinese Publicly Traded Securities Unaffected

While this new regulation imposes restrictions on technology investments, it also includes some exemptions. The U.S. government allows investments in publicly traded securities from China, but U.S. authorities still have the right to prohibit investments in specific Chinese companies' securities that have been identified as supporting China's military development, based on previous executive orders.

Criticism: China Committee Concerned about U.S. Investment Trends

The U.S. House of Representatives China Task Force has criticized major index providers in the U.S., accusing them of investing billions of dollars to assist Chinese companies involved in military development. With the new regulations set to take effect, whether these investments in China will face further restrictions will be a focus of market attention.