WASHINGTON — The Treasury Department on Friday fleshed out a proposed rule that would restrict and monitor U.S. investments in China for artificial intelligence, computer chips and quantum computing.
The proposed rule stems from President Joe Biden’s August 2023 executive order regarding the access that “countries of concern” have to American dollars that fund advanced technologies, which the U.S. government says would enhance their military, intelligence, surveillance and cyber capabilities. The order identified China, Hong Kong and Macau as countries of concern.
The Biden administration has sought to stymie the development of technologies by China, the world’s second-largest economy, that could give it a military edge or enable it to dominate emerging sectors such as electric vehicles.
In addition to the proposed rule, Democrat Biden has also placed a stiff tariff on Chinese EVs, an issue with political implications as the president and Republican Donald Trump are both trying to show voters who can best stand up to China, a geopolitical rival and major trading partner.
The proposed rule outlines the required information that U.S. citizens and permanent residents must provide when engaging in transactions in this area, as well as what would be considered a violation of the restrictions.
It specifically would prohibit American investors from funding AI systems in China that could be used for weapons targeting, combat and location tracking, among other military applications, according to a senior Treasury official who previewed the rule for reporters on the condition of anonymity.
Treasury is seeking comment on the proposal through August 4, 2024, and after that is expected to issue a final rule.
Biden administration officials, including Treasury Secretary Janet Yellen, have insisted that they have no interest in “decoupling” from China - however, tensions between the two nations have increased in recent years.
After the U.S. military in February 2023 shot down a suspected Chinese spy balloon off the Carolina coast after it traversed sensitive military sites across North America, China threatened repercussions.
Since then, incidents between the two nations based on national security concerns have regularly occurred.
For instance, Biden in May issued an order blocking a Chinese-backed cryptocurrency mining firm from owning land near a Wyoming nuclear missile base, calling its proximity to the base a “national security risk.”
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Associated Press reporter Fatima Hussein contributed to this report.
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