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 Eyes Best Quarter in over Eight Years

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
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Gold Eyes Best Quarter in over Eight Years

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)

Gold halted its record run on Friday but remained on track for its best quarter since 2016 after a rally catalysed by an outsized US Federal Reserve interest rate cut, while markets braced themselves for a crucial inflation report due later in the day.

Spot gold was down 0.1% at $2,666.50 per ounce as of 1115 GMT, below the all-time peak of $2,685.42 hit in the previous session. It is heading for its best quarter since the first three months of 2016.

US gold futures fell 0.2% to $2,688.90, Reuters reported.

"The market at this point in time has priced in all the good news and there's also some hesitancy from fresh buyers to get involved at these record high levels," said Ole Hansen, head of commodity strategy at Saxo Bank.

Bullion has risen 29% so far this year, hitting successive record peaks after last week's half-percentage-point cut by the Federal Reserve and the stimulus measures announced by China earlier this week.

Silver prices surged, tracking bullion's strong performance, though some analysts warn that the rally may fade.

"Overall, industrial demand is still supportive for silver. But we need to have a stronger economic performance in China as well as in other developed countries," said ANZ commodity strategist Soni Kumari.

The surge in silver prices is more a spillover impact from gold, Kumari said.

Spot silver eased 0.1% to $31.98 per ounce, after hitting its highest since December 2012 at $32.71 on Thursday. It is set for a third straight week of gains.

"I do believe silver will continue to outperform gold. But as we all know, wherever gold goes, silver tends to go, but faster," Hansen added.

Both gold and silver serve as safe-haven investments, but the latter has more industrial applications, so tends to underperform during recessions and outperform when economies expand.

Inflows into gold exchange-traded funds, particularly from Western investors, are set to rise in coming months, adding yet more positive stimulus for already record high bullion prices. Some banks expect gold to rise towards $3,000.

In other metals, platinum was up 0.5% at $1,012.40 but palladium fell nearly 1.5% to $1,031.75.