Treasury issues are the rule to deter American investors from helping China develop advanced military technology

WASHINGTON – The U.S. Treasury Department, seeking to prevent China’s military from gaining an edge in advanced technologies, issued a rule Monday to limit and monitor U.S. investments in China in artificial intelligence, computer chips and quantum computers.

The final rule arises from a executive order issued in August 2023 by President Joe Biden. The order was intended to limit the access that “countries of concern” – specifically China, Hong Kong and Macau – have to US dollars to finance technologies that could be used, for example, to crack codes or develop next-generation fighter jets . It will come into effect on January 2.

“U.S. investments… should not be used to help countries of concern develop their military, intelligence and cyber capabilities,” said Paul Rosen, Assistant Secretary of the Treasury for Investment Security. He noted that the investments could mean more than just money; they can provide “intangible benefits,” including management help and assistance in finding top talent and tapping into other sources of financing.

Blocking China’s high-tech ambitions is one of the few issues that enjoys broad support in Washington from both Republicans and Democrats.

Biden imposed a heavy tariff on electric vehicles from China in May. He has also imposed export controls to prevent the Chinese from acquiring advanced computer chips and the equipment to produce them. Former President Donald Trump has promised to dramatically increase taxes on all imports from China if voters return him to the White House.

The Biden administration sought comment from companies and U.S. allies before releasing the final version.

In addition to blocking investments, the rule requires Americans and companies in the United States to notify the U.S. government of transactions involving “technologies and products that may contribute to a threat to the national security of the United States.”

Violators could be hit with fines of up to $368,136 or twice the value of the prohibited transaction, whichever is greater. The Treasury Department is setting up an Office of Global Transactions to oversee the new rule.