Biden Administration Proposes Rules to Curb Investments in China's AI, Tech Sector

Treasure Secretary Janet Yellen addresses the Economic Club of New York luncheon, Thursday, June 13, 2024, in New York (AP)
Treasure Secretary Janet Yellen addresses the Economic Club of New York luncheon, Thursday, June 13, 2024, in New York (AP)
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Biden Administration Proposes Rules to Curb Investments in China's AI, Tech Sector

Treasure Secretary Janet Yellen addresses the Economic Club of New York luncheon, Thursday, June 13, 2024, in New York (AP)
Treasure Secretary Janet Yellen addresses the Economic Club of New York luncheon, Thursday, June 13, 2024, in New York (AP)

The United States Treasury Department has fleshed out a proposed rule that would restrict and monitor US investments in China for artificial intelligence, computer chips and quantum computing.

The fleshed-out draft rule, issued on Friday, stems from President Joe Biden’s August executive order regarding the access that “countries of concern” have to US dollars to fund advanced technologies that could enhance those nations’ military, intelligence, surveillance and cyber-capabilities. The order identified China, Hong Kong and Macau as countries of concern, according to the Associated Press.

The Biden administration has sought to stymie the development of technologies by China, the world’s second largest economy, that could give it a military edge or enable it to dominate emerging sectors such as electric vehicles (EVs).

In addition to the proposed rule, Biden, a Democrat, has also placed a stiff tariff on Chinese EVs, an issue with political implications as Biden and his Republican presidential opponent Donald Trump are both trying to show voters who can best stand up to China, a geopolitical rival and major trading partner.

According to the Financial Times, the regulation — which could be amended following a six-week public comment period — is aimed at restricting the flow of US technology, capital and expertise to groups in China that work with the People's Liberation Army.

The newspaper said it is the latest US effort to make it harder for Chinese groups deemed to be a security threat to gain access to new technology and will complement several sweeping export control packages introduced over the past two years.

Assistant Secretary of the Treasury for Investment Security Paul Rosen said, “This proposed rule advances our national security by preventing the many benefits certain US investments provide—beyond just capital—from supporting the development of sensitive technologies in countries that may use them to threaten our national security.”

The regulation would introduce outright bans on certain investments and require American individuals and organizations to notify the government of other transactions, FT said.

It also includes possible exceptions, including for investments in publicly traded securities or funds. The new rule would affect everything from equity investments to debt financing that is convertible to equity. It would also apply to greenfield investments and joint ventures. But it would exempt investments by limited partners (LP) — endowments and pension funds that seed venture capital and private equity groups — below a certain threshold.

According to FT, the Treasury said the regulation would prevent the exploitation of US investment by countries “seeking to develop sensitive technologies or products that are critical to the next generation of military, intelligence, surveillance, or cyber-enabled capabilities” that pose a threat to the US. But it singled out China as a “country of concern.”

J. Philip Ludvigson, a partner at King & Spalding and a former Treasury official for Investment Security, said “companies and investors are now getting a much better look at what will be expected of them” under the new outbound investment program.

“These added details are particularly important because the private sector will be shouldering the many due diligence and compliance burdens associated with making new investments,” he said.

The Biden administration has been criticized — mostly by Republican lawmakers — for not proposing to ban investment in publicly traded securities.

FT said the effort to screen outbound investment is one of a number of issues that have stoked tensions between the US and China.

In the six months since Biden and China’s President Xi Jinping met in San Francisco, the two countries have stepped up high-level engagement to try to stabilize relations.

But senior US officials from Treasury secretary Janet Yellen to national security adviser Jake Sullivan have been clear with Beijing that Washington will continue to introduce measures to reduce what they view as security threats from China.



Gold Gains on Weaker Dollar; Traders Brace for Fed Rate Decision

FILE PHOTO: Gold bars are displayed at a gold jewelry shop in the northern Indian city of Chandigarh May 8, 2012. REUTERS/Ajay Verma/File Photo/File Photo
FILE PHOTO: Gold bars are displayed at a gold jewelry shop in the northern Indian city of Chandigarh May 8, 2012. REUTERS/Ajay Verma/File Photo/File Photo
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Gold Gains on Weaker Dollar; Traders Brace for Fed Rate Decision

FILE PHOTO: Gold bars are displayed at a gold jewelry shop in the northern Indian city of Chandigarh May 8, 2012. REUTERS/Ajay Verma/File Photo/File Photo
FILE PHOTO: Gold bars are displayed at a gold jewelry shop in the northern Indian city of Chandigarh May 8, 2012. REUTERS/Ajay Verma/File Photo/File Photo

Gold prices firmed on Monday, supported by a softer dollar, as investors awaited further details on the US-China trade relations, along with the Federal Reserve's policy meeting due later this week.

Spot gold gained 0.5% to $3,256.85 an ounce, as of 0416 GMT. US gold futures rose 0.7% to $3,265.10.

The dollar was down 0.3% against its rivals, making gold more attractive for other currency holders.

"The US dollar is looking subdued ahead of the Fed meeting this week which is enabling gold to take a mild run higher," KCM Trade's Chief Market Analyst Tim Waterer said.

"We may see gold continue to operate in the $3,200-$3,350 range ahead of the Fed meeting. However, any new headlines on the trade deal could cause volatility to tick up once again."

The market's focus will be on the US central bank policy decision and speeches by several Fed officials due this week, for insights into future monetary policy trajectory.

Traders are now expecting 80 basis points of rate cuts this year starting in July, following the US Labor Department's report on Friday showing larger-than-expected job additions in April.

Non-yielding gold acts as a hedge against global uncertainty and inflation and tends to thrive in a low-interest-rate environment. US President Donald Trump said he will not remove Jerome Powell as Fed Board Chairman before his term ends in May 2026, while reiterating his call for the Fed to cut interest rates.

Trump on Sunday said the US was meeting with many countries, including China, on trade deals, and his main priority with China was to secure a fair trade deal.

Chinese markets are closed for the Labor Day holiday from May 1-5 and will resume trade on Tuesday, May 6.

Spot silver rose 0.5% to $32.14 an ounce, platinum fell 0.2% to $957.77 and palladium gained 0.2% to $955.28.