The Biden Administration on Monday, Finalized Regulations limiting U.S. Investment and Technical Assistance in Chinese Development of Cutting-edge Technologies with Military applications.
The New Treasury Department Rules, designed to implement President Biden’s August 2023 Executive Order, target U.S. Support for Three sectors: Semiconductors and Microelectronics; Quantum Computing; and Artificial Intelligence (AI).
The Administration says those Technologies are “core to the next generation of military, cybersecurity, surveillance and intelligence operations.” Existing U.S. Regulations Restrict the Export of such Products to China and other potential Adversaries, which the Administration describes as “Countries of Concern.”
The Regulations, which take effect Jan. 2nd, 2025, Prohibit U.S. Financing of some Ventures and require Americans to Report their Involvement in others.
A Key Aim is to Prevent China from enjoying the “intangible benefits” believed to come with U.S. Financial Support, including “enhanced standing and prominence, managerial assistance, investment, and talent networks, market access.”
Despite slowing Economic Growth, Chinese Public and Private Funds have plenty of Capital. Nearly Three-Quarters of the Money pumped into Chinese AI Projects between 2015 and 2021 came from Chinese Investors, according to Georgetown University’s Center for Security and Emerging Technology.
The Regulations come as U.S. Investment in China has been Declining for years. U.S. Venture Capital in China reached a 10-year Low of $1.3 billion in 2022, down from a Peak of $14.4 billion in 2018, according to the Rhodium Group in New York.
One Independent Expert said that the Regulations are likely to be Scrapped and Replaced with Tougher Limits, if Trump Wins a Second Term in Office.
“It’s completely worthless to finalize implementation of a presidential [order] eight days before an election where the president isn’t running,” Derek Scissors, a China Specialist at the American Enterprise Institute, said via email. “Three years to do something that could have taken three months. It was intentional.”
The Rules capped a lengthy Internal Debate over precisely where to Set the Limits for U.S. Involvement in Fast-developing Technology Sectors. For example, only Artificial Intelligence (AI) Projects using a Specified amount of Computing Power are covered by the New Prohibition.
Under the Treasury Regulations, Americans remain able to Invest in Publicly traded Chinese Companies or Participate in Venture Capital or Private Equity fFnds with Stakes worth up to $2 million.
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