Biden Administration Implements New Regulations on U.S. Investments in Chinese Advanced Technologies
On August 9, President Biden issued an executive order directing the U.S. Department of the Treasury to adopt regulations that will impact U.S. investments in Chinese companies involved in the development of advanced semiconductors and microelectronics, quantum computing and information technologies, and certain artificial intelligence systems. The move comes in response to national security concerns regarding the rapid development of these technologies by Chinese companies and their potential contribution to China’s military capabilities.
The executive order requires U.S. persons to notify the Treasury of certain investments involving covered foreign persons and technologies that may pose a threat to U.S. national security. In some cases, these investments may be prohibited altogether. The aim is to limit Chinese companies’ access to U.S. investments and the associated benefits such as managerial assistance, talent acquisition, market access, and additional financing.
Treasury will be responsible for implementing the regulations following a public comment period. They have issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit comments from the industry on the potential scope of the new regulations, as well as to provide additional information about Treasury’s views on the intended framework. This development marks the establishment of a new outbound investment regulatory regime in the United States.
While the current regulations primarily target certain advanced technologies, it is possible that this framework could be applied to other sectors deemed critical to U.S. national security and investments in other countries. U.S. investors and individuals in the technology industry are advised to thoroughly review the executive order and ANPRM to understand the potential scope of the new regulatory regime. They are also encouraged to provide feedback on Treasury’s intended framework outlined in the ANPRM.
The executive order grants Treasury the authority to investigate subject investments, nullify or void prohibited transactions, and refer criminal violations to the Department of Justice.
The ANPRM provides insight into how Treasury plans to structure the forthcoming regulations. It requests comments on various aspects of the regulatory regime, which are due by September 27. Among the proposed conditions, parent companies may be subject to the regulations if their subsidiaries or branches engage in certain activities and account for a significant portion of the parent company’s revenue or expenses. Treasury is considering exemptions for exceptional circumstances where a prohibited transaction could provide extraordinary benefits to U.S. national security or interest.
It is essential to note that the new regulations could have far-reaching implications beyond just the targeted advanced technologies today. This development represents a significant step in U.S. efforts to safeguard national security interests and regulate outbound investments.
Overall, the implementation of these regulations signifies the Biden administration’s commitment to addressing national security concerns surrounding the development of advanced technologies by Chinese companies. By imposing restrictions on U.S. investments in specific sectors, the government aims to limit potential contributions to China’s military capabilities and protect vital American interests. However, further discussions and public comments will shape the final framework before its implementation.
