The U.S. Treasury Department has announced a new regulation aimed at restricting and overseeing American investments in China, particularly in sectors such as artificial intelligence, semiconductor manufacturing, and quantum computing. This measure is designed to prevent the Chinese military from leveraging advanced technologies to enhance its capabilities.
This finalized regulation is a direct outcome of an executive order from President Joe Biden issued in August 2023. That order aimed at limiting financial resources available to “countries of concern,” specifically targeting China, Hong Kong, and Macau. It seeks to curb their access to U.S. capital, potentially diverting it away from emerging technologies that may facilitate military advancements, such as developing sophisticated fighter jets or advanced encryption techniques. The new rules are set to come into force on January 2.
Paul Rosen, the assistant Treasury secretary responsible for investment security, emphasized that U.S. investments should not empower these nations in their military, intelligence, or cyber operations. He pointed out that these investments can offer more than just financial support; they might also provide strategic advantages such as managerial expertise and access to a skilled workforce or alternative funding sources.
Addressing China’s advancements in technology remains a rare issue that garners unanimous support among lawmakers in Washington, encompassing both Republican and Democratic views. Earlier this year, Biden imposed a heavy tariff on electric vehicles imported from China and enacted export controls to prevent China from acquiring cutting-edge computer chips and the machinery necessary for their production. In addition, former President Donald Trump has proposed significantly increasing taxes on all imports from China should he return to the presidency.
Before finalizing the regulation, the Biden administration sought input from businesses and international allies to refine the policy. Beyond prohibiting certain investments, the rule mandates that individuals and corporations within the U.S. report transactions involving technologies and products that could pose a threat to national security.
For those who violate these regulations, penalties can reach up to $368,136 or double the amount of the restricted transaction, whichever is more severe. To ensure compliance with the new regulation, the Treasury Department is establishing an Office of Global Transactions as part of its oversight efforts.
