Daily Management Review

US Begins The Process Of Limiting Some Investment In Crucial Technologies In China


US Begins The Process Of Limiting Some Investment In Crucial Technologies In China
The White House announced on Wednesday that it will start limiting American investments in some critical Chinese technologies and needing government approval for other ventures, but warned that it might be some time befor0e the changes took effect.
An executive order requiring the U.S. Treasury Department to oversee specific U.S. investments in semiconductors and microelectronics, quantum computing, and artificial intelligence was signed by President Joe Biden on Wednesday.
The directive outlines strategies to control investments in a few "countries of concern," with China, Hong Kong, and Macau being the order's initial objectives in a separate annexe. A senior administration official suggested that additional nations might be included later.
The programme for outbound investments would mandate notification for many investments while forbidding others. According to officials, the objective is to prevent the "most acute" threats to national security by controlling investments in Chinese firms and organisations in sectors where China might gain a military or intelligence edge.
According to a government official, the regulations won't be applied to previous investments and will only apply to new ones.
Many technologies and goods that are being considered for the new programme are already subject to U.S. export restrictions or bans. However, limiting investment would prevent U.S. funds from assisting China in strengthening its domestic capabilities, which could jeopardise current export controls and inbound investment screening programmes.
Treasury released an advance notice of proposed rulemaking in conjunction with Biden's order, giving businesses and investors time to respond before it moves through with a formal notice of planned regulation..
That would enable Treasury to design the new regulations before receiving more public feedback.
The entire procedure, according to experts, may take many months, delaying the implementation of the new legislation until well into 2024—a year with a presidential election.
According to authorities, Treasury would have the power to look into suspected infractions and seek any applicable penalties. It may also unravel upcoming investments.
Treasury stated that the programme would likely concentrate on American citizens involved in joint ventures, greenfield projects, and equity stakes that could provide "intangible benefits" to Chinese businesses.
Investments in publicly traded stocks, index funds, mutual funds, and other products that were less likely to produce intangible benefits are being considered for an exception.
Treasury stated that it was considering forbidding American investments in Chinese companies that are engaged in the design, fabrication, or packaging of advanced integrated circuits, the installation or sale of supercomputers, or the creation of software or equipment for semiconductor production.
It was thinking about mandating notification for investments made in businesses engaged in the development, production, and packaging of less sophisticated integrated circuits.
Investments by the United States in the development of specific quantum sensors, quantum networking, and communication systems in China may also be prohibited.
Treasury stated that it is exploring notification rules for American investments in Chinese companies developing software that integrates an AI system and may be used for military or intelligence purposes.
In order to make sure that such measures are "appropriately tailored" in the final guidelines, it is also soliciting input from stakeholders on how to structure a ban on American investments in Chinese projects involving software that contains an AI system and is made for uses that might have ramifications for national security.
Officials claimed that the actions had been thoroughly reviewed with allies and partners. They also claimed that Treasury Secretary Janet Yellen and other U.S. officials had frequently and emphatically assured Beijing that the limitations would be strictly limited.
Although Britain and the European Union have already indicated their intention to move in a similar direction, and the Group of Seven advanced economies agreed in June that restrictions on outbound investments should be included in the overall toolkit, no coordinated action by allies was anticipated on Wednesday.