U.S. Investment Restrictions in Chinese AI

By Karen Freifeld

(Reuters) – U.S. rules that will ban certain U.S. investments in artificial intelligence in China are under final review, suggesting the restrictions are coming soon.

The rules will require U.S. investors to notify the Treasury Department about some investments in AI and other sensitive technologies. These stem from an executive order signed by President Joe Biden in August 2023, aimed at preventing American investors' expertise from aiding China's military.

The final rules target outbound investments to China in AI, semiconductors, microelectronics, and quantum computing and are being reviewed by the Office of Management and Budget. This review typically indicates they will be released soon.

Former Treasury official Laura Black noted the timing may coincide with the upcoming U.S. presidential election on November 5. She mentioned that the Treasury generally provides a 30-day window before such regulations take effect.

In June, the Treasury Department published proposed rules and invited public comments. These draft rules required U.S. individuals and companies to determine which transactions would be restricted.

A Treasury Department spokesperson declined to comment. Black anticipates the final rules will clarify the coverage over artificial intelligence and the thresholds for limited partners.

The proposed rules banned transactions in AI for certain uses, especially those involving systems trained on specified computing power. They also required notification for transactions concerning the development of AI systems or semiconductors that are not otherwise restricted.

Proposed exceptions included publicly traded securities such as index funds or mutual funds, certain limited partnerships, and some syndicated debt financings.