US authorities have introduced restrictions on investment in certain sectors of the Chinese economy

The looming US presidential election is an inevitable catalyst for the legislative work that has been underway under Joseph Biden, and rules to control US investments in certain sectors of the Chinese economy were approved this week after more than a year of intense discussion with stakeholders.

Image source: Micron Technology

As Bloomberg notes, American investors will now either have to notify the country’s authorities about their investments in the capital of Chinese companies of a certain profile, or will be deprived of making such investments. Areas of the Chinese economy related to the design and production of semiconductor components, quantum computing and artificial intelligence will receive increased attention from American regulators.

US Treasury Undersecretary for Investment Security Paul Rosen noted in a press release that American capital should not contribute to the development of the military, intelligence and cyber capabilities of unfriendly countries. In addition to investments as such, US authorities want to block Chinese companies’ access to various types of competencies, including human resources.

The approach to introducing restrictions turned out to be differentiated within one category. For example, the rules prohibit American investors from supporting the development and production of advanced chips in the United States, but allow investment in the production of chips using mature lithography technologies. In the latter case, participants in foreign economic activity are only required to notify the authorities of their decision.

In the field of artificial intelligence, American investors are prohibited from supporting only Chinese developments with obvious military applications. At the same time, there are still some areas of application of AI in which investment is allowed with the notification of US authorities. The rules restrict some forms of investment, but do not prohibit them completely. In other words, American investors still have some opportunities to profit from the growth of certain high-tech sectors of the Chinese economy. For example, it is possible to invest in shares of public Chinese companies, but the US authorities have the right to prohibit individual transactions of this kind. The approved rules will come into force in the United States on January 2 next year, and their compliance will be monitored by a special newly created committee within the country’s Ministry of Finance.