US moves to restrict investments aiding China’s military technology growth

The U.S. Treasury Department has introduced a new rule aimed at preventing the Chinese military from gaining an advantage in advanced technologies by restricting and monitoring American investments in China, particularly in sectors such as artificial intelligence, computer chips, and quantum computing.

This finalized rule is the result of an executive order signed by President Joe Biden in August 2023, which sought to limit access to American financial resources for “countries of concern,” specifically targeting China, including Hong Kong and Macao, Caliber.Az reports citing US media.

The rule is set to take effect on January 2.

“U.S. investments ... must not be used to help countries of concern develop their military, intelligence, and cyber capabilities,” emphasized Paul Rosen, assistant Treasury secretary for investment security. He pointed out that these investments could provide more than just capital; they can also offer "intangible benefits," such as managerial support, assistance in talent acquisition, and access to alternative funding sources.

Blocking China’s technological ambitions has garnered bipartisan support in Washington, with both Republicans and Democrats backing the initiative. In May, President Biden imposed significant tariffs on electric vehicles from China and implemented export controls to prevent the Chinese from acquiring advanced computer chips and production equipment. Former President Donald Trump has also pledged to significantly increase taxes on all imports from China if he is re-elected.

In response to the U.S. actions, a spokesperson for the Chinese Foreign Ministry expressed strong disapproval, stating that the government had lodged a protest against the investment restrictions. “China strongly deplores and firmly opposes the U.S. rolling out restrictions on investment in China,” said Lin Jian at a daily briefing in Beijing.

Hong Kong’s leader also criticized the new rule, claiming it undermines normal investment and trade and could harm the global supply chain. “In pursuing their political agenda, American politicians are harming not only others but also the interests of their own country, their people, and their businesses. They will have to face the consequences of their actions,” stated John Lee, noting that the U.S. has enjoyed a $472 billion trade surplus with Hong Kong over the past decade.

Before finalizing the rule, the Biden administration sought input from businesses and U.S. allies. In addition to restricting investments, the new rule mandates that Americans and U.S. companies notify the government of transactions involving “technologies and products that may contribute to a threat to the national security of the United States.”

Violators could face fines of up to $368,136 or twice the value of the prohibited transaction, whichever amount is greater. To oversee the implementation of this rule, the Treasury Department is establishing an Office of Global Transactions.

By Tamilla Hasanova