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.



Dollar Drifts as Traders Grapple with Tariff Uncertainty, Volatility

A teller counts US dollar bank notes at a money changer in Jakarta, Indonesia, April 9, 2025. Picture taken through glass. REUTERS/Willy Kurniawan/File Photo
A teller counts US dollar bank notes at a money changer in Jakarta, Indonesia, April 9, 2025. Picture taken through glass. REUTERS/Willy Kurniawan/File Photo
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Dollar Drifts as Traders Grapple with Tariff Uncertainty, Volatility

A teller counts US dollar bank notes at a money changer in Jakarta, Indonesia, April 9, 2025. Picture taken through glass. REUTERS/Willy Kurniawan/File Photo
A teller counts US dollar bank notes at a money changer in Jakarta, Indonesia, April 9, 2025. Picture taken through glass. REUTERS/Willy Kurniawan/File Photo

The dollar wobbled on Tuesday, languishing near a three-year low against the euro and a six-month trough against the yen it hit last week, as investors struggled to make sense of the back-and-forth changes on US tariffs.

Still, currency markets were a lot calmer in Asian hours after last week's turmoil that badly bruised the dollar despite a surge in Treasury yields, highlighting shaky investor confidence in the greenback and US assets.

The dollar was slightly weaker at 142.99 yen, staying close to the six-month low of 142.05 it touched on Friday. The euro last fetched $1.136, just below the three-year high of $1.1474 hit last week.

After slumping to a 10-year low against the Swiss franc last week, the dollar was 0.2% higher on Tuesday. Still, the dollar is down nearly 8% against the Swiss franc this month, set for its biggest monthly drop since December 2008, Reuters reported.

Market focus has been on the ever-shifting tariff headlines with the US removing smartphones and other electronics from its duties on China over the weekend providing some relief, although comments from President Donald Trump suggested the reprieve is likely to be for a short time.

Trump's imposition and then abrupt postponement of most tariffs on goods imported to the US has sowed confusion, adding to the uncertainty for investors and policymakers around the world.

Kieran Williams, head of Asia FX at InTouch Capital Markets, said the policy uncertainty and erosion in investor confidence are fuelling a slow but steady rotation out of dollar assets.

"The recent backpedaling on US tariffs has eased some of the acute market anxiety, softening the dollar’s safe-haven appeal in the near term."

The yield on the benchmark US 10-year Treasury note eased 1.5 basis points to 4.348% after dropping nearly 13 basis points in the previous session.

The yields had risen about 50 bps last week in the biggest weekly gain in over two decades as analysts and investors questioned US bonds' status as the world’s safest assets.

"Last week was all about deleveraging, liquidation, and asset re-allocation out of US assets. This week's tone is calmer in what is a holiday shortened week," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.

"Helping to set the tone were dovish comments from Fed officials suggesting they are looking beyond inflation."

Fed Governor Christopher Waller said on Monday the Trump administration's tariff policies are a major shock to the US economy that could lead the Federal Reserve to cut interest rates to head off a recession even if inflation remains high.

Traders are pricing in 86 bps of cuts from the Fed for the rest of the year, LSEG data showed.

The dollar index, which measures the US currency against six other units, was at 99.641, not far from the three-year low it touched last week. The index is down over 4% this month, set for its biggest monthly drop since November 2022.

Sterling last bought $1.3215. The Australian dollar rose 0.66% to $0.6369, while the New Zealand dollar surged to its highest in four and half months and was last 0.88% higher at $0.5926.