U.S. Moves Ahead With Plan to Restrict Chinese Technology Investments

The Biden administration on Friday outlined its plans to curb new American investment in critical Chinese technology industries that could be used to enhance China’s military, further straining economic ties with Beijing at a time when trade tensions are rising.

The proposed Treasury Department rules would prohibit certain U.S. investments in Chinese companies that are developing semiconductors, quantum computers and artificial intelligence systems. The Biden administration is trying to restrict American financing from helping China develop advanced technology that could be used for weapons tracking, government intelligence and surveillance.

The regulations are expected to be finalized later this year. They come nearly a year after President Biden signed an executive order calling for the investment ban, which will largely affect venture capital and private equity firms that do business with Chinese companies.

“This proposed rule advances our national security by preventing the many benefits certain U.S. 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 Treasury Department’s assistant secretary for investment security.

The restrictions require investors to notify the Treasury Department about certain kinds of transactions, and some types of investments are explicitly prohibited. As part of the program, the Treasury Department has the power to force a divestment and violations could be referred to the Justice Department for criminal prosecution.

The rules apply to equity investments, debt financing that could be converted to equity, and to joint ventures.