The U.S. Department of Treasury is implementing a new rule to limit outbound U.S. investments in Chinese companies developing advanced technologies that could impact U.S. national security.
Senior administration officials previewing the rule said they’re particularly focused on technological advancements being pursued by the Chinese Communist Party (CCP).
“The People’s Republic of China has a stated goal, as you know, to develop key sensitive technologies that will directly support the PRC’s military modernization and related activities, including weapons development, and has exploited U.S. investments to develop domestic military and intelligence capabilities,” one senior administration official said Monday.
A second senior administration official said the new rule is particularly focused on transactions involving semiconductors, quantum computing, and artificial intelligence technologies.
“The final rule has clear thresholds and definitions to implement the executive order and provides detailed explanatory discussion regarding its intent and application to assist investors and other stakeholders to help them navigate this new program,” the second administration official said.
The second administration official said the Treasury rule would prohibit a U.S. person from acquiring equity in a Chinese entity that manufactures advanced semiconductors or that is developing an artificial intelligence system intended exclusively or intended for military end-use. He said the rule would also require a U.S. person to notify the Treasury Department if they’re acquiring equity in a Chinese company that manufactures legacy semiconductors.
The second administration official said the Treasury rule also looks to constrain U.S. investments in technologies that may be used to break into computer networks, undermine encryption systems, and break codes.
Enforcement of the rule will be based on a person’s knowledge of whether their investments constitute a reportable transaction, the second administration official said. He said giving stakeholders until Jan. 2 before the rule goes into effect will allow them to update their compliance rules to reflect the new prohibitions and reporting requirements.
“The United States already prohibits or restricts the export to countries of concern of many of the technologies and products covered by the Final Rule,” the White House said Monday. “This program complements the United States’ existing export control and inbound screening tools by preventing U.S. investment from advancing the development of sensitive technologies and products in countries of concern.”
The new rule was announced amid concerns the CCP is stealing sensitive U.S. technology and rapidly expanding its military and intelligence capabilities.
“Today’s announcement follows extensive and thorough consultations with hundreds of stakeholders, bipartisan members of Congress, industry members, and foreign allies and partners and two rounds of formal comments from the public,” the White House said Monday.
