US finalizes rule to block investments in China-based tech firms to protect AI, military development

The Biden administration this week finalized steps to block Americans from investing in a range of advanced technology, including artificial intelligence (AI), being developed in China. 

The U.S. Treasury Department on Monday finalized a rule that stemmed from an August 2023 executive order issued by President Biden that looks to stop “countries of concern’’ — specifically China, including Hong Kong and Macao — from accessing American investments in developing technologies.

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The rule, which will take effect Jan. 2, was enacted in the interest of U.S. national security and covers three core tech areas, including semiconductors and microelectronics, quantum information technologies and certain AI systems, Reuters reported.

The department listed these “narrow set of technologies [as] core to the next generation of military, cybersecurity, surveillance, and intelligence applications.”

Paul Rosen, assistant Treasury secretary for investment security, said, “U.S. investments … must not be used to help countries of concern develop their military, intelligence and cyber capabilities.”

The move is an attempt to block Beijing from accessing any American know-how as this “cutting-edge technology” continues to develop for not only AI but in “code-breaking computer systems or next-generation fighter jets.”

Participants look at a miniature of a KF-21 fighter jet (front) on display at the Responsible AI in the Military Domain summit in Seoul Sept. 10, 2024. (Jung Yeon-Je/AFP via Getty Images)

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The overall goal is to stop this sophisticated technology from falling into the hands of the Chinese military. 

But these measures could also “close off markets for some of our tech companies and venture capitalists,” explained Phil Siegel, founder of an AI nonprofit, the Center for Advanced Preparedness and Threat Response Simulation (CAPTRS).

While the onus will largely be on U.S. companies to ensure they are complying with the U.S.’s latest rules when it comes to tech development in China, Siegel said he thinks it is unlikely to have many short-term negative consequences.

“Until we understand how this technology might be used by our adversaries, it probably is best to stay the course,” Siegel told Fox News Digital. “The question to ask is does slowing them down have more value than keeping an eye on what they do with these new technologies.”

Participants chat in front of an electronic image of a soldier before the closing session of the Responsible AI in the Military Domain summit in Seoul Sept. 10, 2024. (Jung Yeon-Je /AFP via Getty Images)

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The AI expert pointed out that the latest steps to block China from gaining insight into U.S. tech development also means Washington could lose potential visibility into how Beijing’s AI progress is advancing. 

China once again condemned the latest push by the U.S. to counter its AI development, and the foreign ministry said it had lodged a protest with Washington.

“China strongly deplores and firmly opposes the U.S. rolling out restrictions on investment in China,” Foreign Ministry spokesperson Lin Jian said Tuesday during a daily press briefing. 

Reuters contributed to this report.