US Publishes Draft Rules On China AI, Chip Investment

US publishes draft rules governing investments into AI, other emerging technologies in China amidst political tensions

US authorities on Friday issued draft rules for restrictions on and monitoring of investments in artificial intelligence (AI) and other technologies in China that could affect national security.

The rules, which the government hopes to finalise by the end of the year, follow an initial comment period initiated by an executive order by US president Joe Biden last August.

They come on the heels of increasingly stringent restrictions designed to stem the flow to China of technologies that could help the country to develop advanced technologies or high-tech military applications or go dominate emerging sectors such as electric vehicles.

Public comments on the draft rules are to be accepted until 4 August.

Image credit: US Treasury
Image credit: US Treasury

Emerging technologies

The rules seek to regulate certain US investments into semiconductors, quantum computing and AI in “countries of concern” identified in the executive order as mainland China, Hong Kong and Macau.

Biden has also levied large tariffs on Chinese EVs as he and Republican Donald Trump prepare for elections in November.

The rules would specifically prohibit US investors from funding AI systems in China that could be used for weapons targeting, combat, location tracking or other military uses.

US individials and companies are responsible for determining which transactions would be restricted or blocked, placing a significant burden of due diligence on potential investors in China.

“This proposed rule advances our national security by preventing the many benefits certain US investments provide – beyond just capital – from supporting the development of sensitive technologies in countries that may use them to threaten our national security,” said Paul Rosen, the US Treasury Department’s assistant secretary for investment security.

‘Narrow and targeted’

The department said the rules were intended to form “a narrow and targeted national security programme” focused on certain outbound investments in countries of concern.

Friday’s publication also included numerous exemptions, such as for investments deemed to be in the US’ national interest.

In addition to banning AI investments for certain uses or involving systems trained trained using above a threshold of computing power, investors would also have to notify the government of transactions related to AI or semiconductors that are not otherwise prohibited.

Officials have said the order could later be broadened beyond the initial countries of concern.