US Finishes New China Tech Investment Block

Chinese resilience to the US sanctions is about to face a further test. The US finalized a directive prohibiting its people and companies from investing in fields spanning AI, quantum computing, and semiconductors.

The US Department of the Treasury completed the process a little more than a year after President Joe Biden upped the ante in a tech clampdown commenced by predecessor Donald Trump, all predicated on the belief China poses a threat to national security. A final rule by the department shores up existing sanctions by defining the subsets of each technology covered. The details were decided in consultation with the US Department of Commerce, other government agencies, and the public. The final rule comes into effect on 2 January 2025.

Paul Rosen, assistant secretary for investment security, stated the final rule takes targeted and concrete measures to ensure that US investment is not exploited. He added that AI, semiconductors, and quantum technologies are fundamental to the development of the next generation of military, surveillance, intelligence, and certain cybersecurity applications. Rosen noted the rules also cover managerial assistance and access to investment and talent networks, elements he said are often included in investments.

The government allowed exceptions to be made in cases where a US investor does not receive rights beyond those of a standard minority shareholder, spanning publicly traded securities, certain limited partnerships and derivatives, and more. In the same statement, the US argued it is committed to fostering an open investment environment. Rosen credited Department of the Treasury Secretary Janet Yellen for working to ensure the effectiveness of this measure and that the rule will not jeopardize the open investment environment that benefits the US.

The final rule is intended as an accompaniment to US sanctions on chip shipments, though the effectiveness of those has proved hard to gauge, as Chinese tech heavyweights appear to be faring just as well without the Western technologies. But the head of TSMC this week warned political wrangling and other factors are putting the global chip industry into a death spiral and adversely affecting the company.