Explainer-U.S. starts process to restrict some investment in key tech in China
2023.08.09 17:21
© Reuters. FILE PHOTO: A central processing unit (CPU) semiconductor chip is displayed among flags of China and U.S., in this illustration picture taken February 17, 2023. REUTERS/Florence Lo/Illustration/File Photo
By Andrea Shalal and Karen Freifeld
WASHINGTON (Reuters) – The White House on Wednesday announced plans to prohibit some U.S. investments in certain sensitive technologies in China, and require that the government be notified of other investments, but said it could take time before the moves take effect.
President Joe Biden on Wednesday signed an executive order directing the U.S. Treasury Department to regulate certain U.S. investments in narrowly defined areas such as semiconductors, quantum computing and artificial intelligence, senior administration officials said.
Following are some key details:
‘COUNTRIES OF CONCERN’
The order lays out the intention to regulate investments in certain “countries of concern,” with a separate annex naming China, Hong Kong and Macau, as the initial targets. Additional countries could be added in the future, a senior administration official told Reuters.
Administration officials insisted the proposed rule would require notification of many investments while prohibiting a few. The goal is to avert the “most acute” national security risks by regulating investments in Chinese companies and entities working on a narrow set of technologies that could give China military and intelligence advantages.
The rules will not be retroactive, applying only to future investments, an administration official said.
RULEMAKING PROCESS
Biden’s executive order authorizes the U.S. Treasury Department to regulate certain U.S. investments. To do that, Treasury will issue an advance notice of proposed rulemaking, which will allow companies and investors time to comment.
The administration will then assess the public comments by stakeholders and move forward with a formal notice of proposed regulation, with a goal of ensuring public comment.
Experts said that process could take months to complete, pushing enactment of the new regulations well into 2024, a presidential election year, if not longer.
The Treasury would ultimately have the authority to investigate potential violations and pursue available penalties, officials said, adding that the secretary will have the power to unwind future investments.
CONSULTATION WITH ALLIES
Officials said the moves had been carefully discussed with allies and partners, and that U.S. officials, including Treasury Secretary Janet Yellen, had clearly communicated to Beijing Washington’s intention to narrowly limit the measures.
No coordinated action by allies was expected on Wednesday, although Britain and the European Union have already signaled their intention to move along similar lines, and the Group of Seven advanced economies agreed in June that restrictions on outbound investments should be part of the overall toolkit.
