The Biden administration is moving ahead with plans to restrict U.S. investment in key Chinese technology sectors in a move that will further strain already strained U.S.-China relations. The decision, announced by the U.S. Treasury Department, drew swift and harsh condemnation from Beijing and highlighted the widening rift between the world’s two largest economies.
The proposed rules, focused on curbing investments in AI, quantum computing and semiconductors, represent the latest offensive in what many observers call a “technology cold war.” These restrictions are aimed at preventing China from gaining an advantage in technologies critical to national security, particularly those with potential military applications.
China’s Ministry of Commerce expressed “serious concern and resolute opposition” and accused the United States of politicizing and weaponizing trade and commercial issues. The ministry statement urged the United States to “respect the rules of the market economy and the principles of fair competition” and called for the withdrawal of the proposed rules and improvement of economic ties.
China’s strong response underscores the importance of these restrictions. Beijing sees them as an attempt to thwart China’s technological progress and economic development, a charge it has made frequently to Washington in recent years. The ministry went further, claiming the U.S. measures would “stifle the normal development of China’s industry” and disrupt the “security and stability” of global supply chains.
This latest development is part of a broader pattern of growing technology competition between the United States and China. The trade dispute began in 2018 under the Trump administration and has already resulted in significant tariffs on both sides. In addition, the United States has taken steps to restrict the activities of numerous Chinese technology companies in the country and has encouraged global companies to limit their business in China.
U.S. charts new front in tech race with China
As Bloomberg According to the statement, the recently published Notice of Proposed Rulemaking (NPRM) is essentially one of several bureaucratic steps initiated by a Presidential Order issued last August. The US proposed rule is comprehensive in scope, covering various types of investments, including equity acquisitions, certain debt financings, joint ventures and even some limited partner investments in joint investment funds outside the US.
However, the proposal includes exceptions such as investments in publicly traded companies or acquisitions of full ownership, likely to balance national security concerns with maintaining a certain level of economic engagement. The emphasis on AI in these restrictions is particularly notable.
The Administration has expressed concern about China developing AI applications for weapons targeting and mass surveillance, and has highlighted the dual-use nature of the technology and the ethical considerations surrounding its development. This focus on AI reflects its growing importance to future technological and economic competitiveness.
The price of this technological tug-of-war
The potential impact of these restrictions goes far beyond the direct impact on U.S.-China relations. They could lead to further decoupling of the U.S. and Chinese technology ecosystems, accelerating China’s efforts toward technological self-reliance. Moreover, these restrictions could have a ripple effect on international cooperation in scientific research and technological development, slowing progress overall.
From a geopolitical perspective, the move is likely to complicate already strained U.S.-China relations over trade disputes and human rights issues, and may also prompt other countries to reassess their policies on technology investment and knowledge sharing with China.
The challenge for the Biden Administration will be to effectively protect U.S. national security interests without stifling innovation or inflicting undue economic harm. China’s assertion of its right to retaliate has added uncertainty to an already complex situation. Beijing’s response could have significant implications for global trade and technological development.
(Photo by Chenyu Guang)
reference: US imposes new AI chip export controls
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