Intriguing Moves: US Poised to Restrict AI Investments in China
The United States is set to implement new regulations that will ban certain types of American artificial intelligence (AI) investments in China. According to a recent government announcement, the rules are currently in their final review stage, indicating that the restrictions could soon come into effect.
The upcoming regulations result from an executive order signed by President Joe Biden in August 2023. This order is designed to prevent U.S. investors from inadvertently supporting the Chinese military through the transfer of expertise in AI and other sensitive technologies. Besides prohibiting certain investments, these rules will also require U.S. investors to report some AI-related investments to the Treasury Department.
These regulations focus on foreign investments in AI, semiconductors, microelectronics, and quantum computing in China. According to the Office of Management and Budget, the rules are under review, a step that typically precedes the finalization of such regulations within a week.
Laura Black, a former Treasury official now an attorney at Akin Gump in Washington, predicts that the rules aim to be issued ahead of the upcoming U.S. presidential election on November 5th. Black also noted that the Treasury office responsible for overseeing these regulations typically allows a period of at least 30 days before new rules go into effect.
In June, the Treasury Department previously released proposed rules containing several exemptions and opened them for public comment. The draft rules required U.S. individuals and companies to evaluate which transactions would be subject to these new restrictions.
The previously outlined proposed rules would ban transactions in AI for specific applications, including systems trained with a certain level of computing power. They also stipulated that transactions related to the development of AI systems or semiconductors, not yet prohibited, must be reported.
Proposed exemptions in the draft rules included publicly traded securities such as mutual funds or index funds, certain investments in limited partnerships, and specific syndicated loan financing arrangements.
Reuters contributed to this article.