Biden Signs Order to Ban AI and other High-Tech Investments Despite Concerns on Curbing China

BEIJING, August 9 (TiPost)— The Biden administration started to further restrictions on cutting-edge technologies despite increasing concerns about curbing China.

Credit：TiPost

U.S. President Joe Biden signed an executive order on Wednesday to impose new restrictions on American investments in so-called sensitive technologies, citing national security threats. The order, which was long in the works and reported about the government’s consideration, was widely deemed as the new effort to prevent technologies and money from the United States flowing to China.

According to the order, Biden believes there are some countries that not just research and develop but also acquire and divert advanced technologies for purpose of achieving military dominance. He finds these countries’ rapid advancement in sensitive technologies and products will “constitutes an unusual and extraordinary threat to the national security of the United States”, and certain U.S. investments risk exacerbating this threat.

Therefore, Biden ordered to issue regulations to prohibit United States persons from engaging, directly or indirectly, in transactions that are determined by the Secretary of the Treasury, the Secretary of Commerce and other heads of relevant agencies as those posing a particularly acute national security threat, and regulations which could prohibit Americans from knowingly directing prohibited transactions.The Secretary of the Treasury may require, following new regulations, prohibit and prevent any transaction by a foreign entity controlled by United States person who engages in prohibited transaction.

The order defines covered national security technologies and products as semiconductors and microelectronics, quantum information technologies, and artificial intelligence (AI) sectors that are critical for the military, intelligence, surveillance, or cyber-enabled capabilities. And the entity means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization; which suggests the order effectively targets investments by U.S. private equity (PE) and venture capital firms as well as joint ventures in semiconductor, quantum computing, AI and other key strategic technologies, in which China is ratcheting up efforts to drive the development.

The new executive order is “narrowly protecting our national security interests” as it’s not an economic one, but a national security action, CNN report cited an official in a call Wednesday. One critical purpose of the new order and forthcoming regulation is about limiting China’s access to the “intangibles,” like technical know-how or relationships with experts, that often accompany investment from venture capital or private equity firms, a senior official said, according to the report.

Chinese firms could face new challenges in innovation as Biden’s new order may limit American companies’ access to Chinese market and their cooperation with Chinese partners, thus damaging their competitiveness, Hong Yong, an expert at a thinktank on digital economy told the state-backed newspaper the Global Times.

The forthcoming restrictions will not have any meaningful impact on Chinese companies because the development of China’s industries now relies less on the United States, and China is not particularly short of funds at the moment as a number of domestic major companies are actively investing in key sectors, commented Xiang Ligang, director-general of Information Consumption Alliance, a Beijing-based telecom industry association, according to the Global Times.

A Bloomberg report expected the investment restriction could only apply to Chinese firms that aget at least half of their revenue from high-tech sectors including AI. It noted that the new order would still allow U.S. PE and venture capital firms to invest in larger Chinese conglomerates that may have AI divisions but get most of their revenue from other sources.

The U.S. businesses and the related industry groups have issued their warnings these months due to their mounting concerns about the possible new curbs on China.

The chief executive officers (CEOs) of three leading U.S. chip companies–Intel Corp., Qualcomm Inc. and Nvidia Corp. were said to lobby against further restrictions on semiconductor-related exports to China last month. In its statement that month, the Semiconductor Industry Association (SIA) of the United States called on Beijing and Washington to ease tensions and seek solutions through dialogue, not further escalation. The industry body urged U.S. government to refrain from further restrictions until it engages more extensively with industry and experts to assess the impact of current and potential restrictions. It warned that the restrictions imposed by the Biden administration “risk diminishing the U.S. semiconductor industry’s competitiveness, disrupting supply chains, causing significant market uncertainty, and prompting continued escalatory retaliation by China”.

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