The Chinese government has expressed serious concerns after the United States proposed a detailed set of rules to restrict and monitor U.S. investment in China in artificial intelligence, semiconductors and quantum computing.
China’s Ministry of Commerce said on Monday that the United States has repeatedly stressed that it has no intention of severing ties with China or hindering China’s economic development, but in fact is trying to restrict investment by U.S. companies in China and curb the normal development of Chinese industry.
“This is a typical generalized national security approach and runs counter to what the leaders of our two countries agreed to at their meeting in San Francisco,” a Defense Department spokesman said. SaidHe was referring to the meeting between Chinese President Xi Jinping and U.S. President Joe Biden that took place in the United States last November.
“The restrictions will have a negative impact on normal economic and trade cooperation between Chinese and U.S. companies, undermine the international economic and trade order, and disrupt the security and stability of the global industrial and supply chains,” he said.
He added that China reserves the right to oppose the U.S. measures and take corresponding measures. He called on the U.S. government to stop politicizing and weaponizing trade issues.
Zhou Mei, a researcher at the Ministry of Commerce, Said Washington’s investment restrictions will accelerate the decoupling of high-tech cooperation between the U.S. and China and slow global scientific development and technological innovation, they said.
Beijing’s comments were released by the US Treasury Department on June 21. issued A Notice of Proposed Rulemaking (NPRM) to implement President Biden’s Executive Order published last August titled “Addressing U.S. Investments in Certain National Security Technologies and Products in Countries of Concern.”
The Treasury Department said the NPRM sets out a process for establishing new national security programs to address threats posed by certain U.S. foreign investments in mainland China, Hong Kong, and Macau.
“The proposed NPRM would promote our national security by preventing many of the benefits – other than capital – of certain U.S. investments from supporting the development of sensitive technologies in countries that could threaten our national security,” said Paul Rosen, assistant secretary of the Treasury for investment security.
The Treasury Department is seeking comments on the proposal until August 4 and expects the regulations to come into effect by the end of the year.
Biden’s Presidential DecreeThe Treasury Secretary should issue regulations banning Americans from working in AI, chips, and quantum computing in China.
The regulations should also require U.S. persons to notify the Treasury Department of certain other transactions involving these technologies or products that could threaten the national security of the United States.
The NPRM states that a “covered transaction” may be a prohibited transaction or may be only a notifiable transaction.
Eligible transactions include providing debt financing, converting convertible bonds, greenfield investments (a type of foreign direct investment in which a company sets up operations abroad), entering into joint ventures and investing as a limited partner (LP) or equivalent.
Chinese FDI
China Ministry of Commerce Said The Chinese government announced on June 21 that total outward direct investment in the first five months of this year fell 31% to $57.9 billion from $84.3 billion in the same period in 2023.
China’s FDI in high-tech manufacturing rose 2.7 percent to $6.9 billion. FDI from Germany and Singapore into China increased 24 percent and 16 percent, respectively, from a year ago, but the Commerce Department did not release detailed FDI figures by country.
China’s high-tech development certainly requires the participation of foreign capital, but it relies primarily on domestic funding and the policy environment. Said Xiang Ligang, secretary-general of the Zhongguancun Information Consumer Alliance, a Beijing-based telecommunications industry group.
Xiang said the proposed U.S. investment restrictions sent a clear signal to China that it must develop its own AI technologies, and he noted that Beijing has recently launched a national policy to support Chinese tech startups.
On June 15, the State Council of China document Local governments, state-owned enterprises, banks, private equity and asset management firms, and long-term fund managers will be encouraged to provide loans, subsidies and capital to technology start-ups.
The ministry said financial authorities should create a favorable financing environment for tech companies to raise capital and grow, and that China will tweak regulations to attract foreign investment.
Professor Guan Quan of the School of Economics at Renmin University of China said: article The United States recently sent officials to Japan and the Netherlands to request that they strengthen export controls on semiconductor manufacturing equipment, it was reported on June 23.
In addition, Washington also plans to add 11 Chinese semiconductor manufacturing plants to the Entity List, he said. All these moves clearly demonstrated that the Biden administration will not stop suppressing China’s semiconductor industry, he said.
He said the only way China could end all of these restrictions is to achieve technological breakthroughs that would one day allow it to become self-sufficient in all the semiconductor manufacturing tools it needs, but he did not offer a timeline or roadmap for how China could achieve that goal.
Chinese students return home
Some commentators say China could still use the opportunity to attract U.S. investment into its high-tech sector, as it could take another six months for the proposed U.S. investment restrictions to become law.
On the other hand, the impact of banning Chinese students from studying or acquiring AI skills in the United States would be immediate.
On June 22, state media outlet China Daily reported: report Four Chinese students traveling to the United States for an academic conference recently reported being subjected to “unreasonable harassment, questioning and deportation” by US border patrol officers.
Four science students, including two with an interest in AI research, were reportedly questioned by border officials about their personal details, family details and whether they were members of the Chinese Communist Party.
The United States has reportedly repatriated more than 30 Chinese students in recent years, mostly seeking master’s or doctoral degrees in computer-related fields.
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