WASHINGTON — The Treasury Department is moving to close gaps on U.S. investment flowing into China’s tech sector left unaddressed by Congress and earlier actions by the Biden administration.

A proposal issued late last month would outright prohibit investment by U.S. citizens and residents in specific technologies within artificial intelligence, quantum computing, and semiconductor manufacturing that officials say must be addressed.

The bans include outlays for design automation software and fabrication of certain high-end semiconductors. The proposal would bar investments in development and production of quantum computers and their critical components, as well as quantum sensing and certain communications platforms. And it aims to stop U.S. capital from flowing into artificial intelligence systems with national security end uses, as well as those that require a certain threshold level of computing power or are trained using biological sequence data.

In addition to the outright bans, investments in semiconductor manufacturing, AI, and quantum computing that fall outside the specific areas of prohibition would require notification within 30 days of a transaction.

Public comments are due by Aug. 4, though there’s no expected date yet for a final rule.

The Treasury Department action is the latest step in a process that began in August 2023 when President Joe Biden issued an executive order prohibiting private equity and venture capital investments in China’s sensitive technology sectors if they would help Beijing gain new military capabilities. It’s also part of a larger effort that includes export controls on sensitive technologies to slow down China’s technological advances.

Biden’s order emerged after Congress tried but opted not to pass such prohibitions into law; key lawmakers then called on the president to act.

“The proposed rule put forward by the Treasury Department on U.S. outbound investment is an important step forward in strengthening U.S. competitiveness while safeguarding our supply chains and national security,” Rep. Rosa DeLauro, D-Conn., said in an email.

DeLauro, the top Democrat on the House Appropriations Committee, is the author of legislation in the last Congress that called for screening U.S. capital flowing into Chinese tech. It passed the House with bipartisan support but not the Senate.

“We cannot fuel the Chinese Community Party’s policies with our capital and capabilities,” DeLauro said. “We have already seen what offshoring critical capabilities has done to our economic and national security — not to mention our industrial base and workforce.”

...continued

©2024 CQ-Roll Call, Inc., All Rights Reserved. Visit cqrollcall.com. Distributed by Tribune Content Agency, LLC.