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Biden admin finalizes order restricting AI, chips investment in China

Oct 28, 2024, 5:00pm EDT
politics
Treasury Secretary Janet Yellen
Andrew Kelly/Reuters
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The News

Certain US investments in artificial intelligence, semiconductors, and quantum computing will be blocked for national security reasons under a new rule the Biden administration finalized Monday.

The final rule, set in motion by an executive order President Biden signed in August 2023, establishes a new program that prohibits US investors from making certain investments in these sectors in China that could aid Beijing’s military development. It also requires them to disclose other investments in these technologies in China to the US government, according to an announcement from the Treasury Department.

The administration sought input from outside stakeholders and US allies over the past year as it finalized the order, which includes more specifics on the technologies it applies to and information Americans must disclose to the Treasury as part of the program.

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A senior Biden administration official described the final rule as “focused on national security and scoped to address specific risks posed by certain US outbound investment” in China. “It maintains our longstanding commitment to open investment,” the official added.

The rule would apply to a variety of transactions, including greenfield investments, corporate expansions, and joint ventures, but includes exceptions, such as for publicly-traded securities and certain limited partner investments. Under the rule, a US company would be blocked from buying land in China to develop a quantum research facility, the official said, offering an example.

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The policy will take effect on Jan. 2, 2025 — days before Biden leaves office. It falls within the window of the Congressional Review Act that allows Congress to overturn federal agency regulations, though the policy has bipartisan support and is likely to survive under a Republican-controlled Congress or administration.

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Members of Congress have tried to pass legislation permanently restricting outbound investment in high-tech sectors in China, but ongoing disagreements have prevented such a law from being enacted. House Republicans are currently in talks about a compromise that would satisfy Republicans like House Financial Services Committee Chairman Patrick McHenry who have opposed proposals that would establish a sector-based approach and favored a narrower sanctions-based measure.

McHenry told reporters Friday that lawmakers are closer to a compromise than they were a few months ago and didn’t rule out passing a bill during the lame-duck session.

“We don’t need to be like China” to outcompete Beijing, he said. “We’re a rule of law country. We need to have a resilient regime, and it needs to be transparent to investors.”

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