US bans chips, quantum and AI investment in China

President Joe Biden signed an executive order that grants the US Treasury Secretary the power to limit or prevent US investments in Chinese organisations involved in three specific sectors: semiconductors and microelectronics, quantum information technologies, and select AI systems. The restrictions would apply to ‘narrow subsets’, but additional specificities have not been divulged yet. The order applies to private equity, venture capital, joint ventures, and greenfield investments.

The Treasury clarified that there would be provision for some exemptions for ‘certain transactions, including potentially those in publicly traded instruments and intracompany transfers from U.S. parents to subsidiaries.’ The order will prohibit some deals and require investors to notify the government of their plans for others.

The executive order intends to prevent American resources and expertise from aiding China in developing technologies that could be used to strengthen its military and threaten US national security.

Meanwhile, China’s Commerce Ministry has expressed its grave concern about the new restrictions. The ministry indicated that these restrictions would affect the normal functioning of businesses and decision-making processes, undermining the international economic and trade order. The Chinese embassy in Washington has also expressed its disappointment with the measure.

The measure is slated to take effect next year following several rounds of public comments.