White House limits AI and chip investments to China over national security concerns

The Treasury Department today issued a final rule which serves to restrict and monitor U.S. tech investments in China in an effort to bolster national security.

The main areas of investment are artificial intelligence, computer chips, and quantum computing. The finalized rules build upon an executive order issued by President Biden in 2023 which blocked Americans and American firms from investing in Chinese sectors to thwart China’s military and intelligence capabilities.

Officials at the White House said such investments “pose a particularly acute national security risk” to the U.S. Paul Rosen, the assistant secretary of Treasury for investment security, explained that one of the dangers lies in China’s ability to vastly improve cybersecurity applications related to code-breaking computer systems or next-generation fighter jets. He said they are also “intangible benefits”, which include helping China’s day-to-day operations, finding other forms of financing, and hiring the best talent.

“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,” said another White House official.

The rule is one of the few areas that has backing from both Republicans and Democrats in what has become a tense relationship between China and the U.S. amidst projections of a future war. Former President Donald Trump has said he’ll vastly increase taxes on all imports from China if he becomes President for a second time while President Biden has tried to slow down China’s microchip production.

Under the new rule, anyone in the U.S. thinking about investing in China will have to notify the Treasury Department if the business relates to the stated technologies. Violators can be fined up to $368,136 or twice the value of the transaction, whichever is higher.

“This Final Rule takes targeted and concrete measures to ensure that U.S. investment is not exploited to advance the development of key technologies by those who may use them to threaten our national security,” said Rosen.

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