US working on new laws to ban investments in Chinese tech firms

The US is working on drafting new regulations that would prohibit investments and transfer of technology to Chinese firms working on developing advanced semiconductors, artificial intelligence, and quantum computing, a US Treasury official said Wednesday.

The new regulations will not only focus on Chinese firms but also military organizations, Paul Rosen, US Treasury’s investment security chief, said at a Senate Banking Committee hearing focusing on countering China and advancing US national security, economic security, and foreign policy.

“We are currently working toward a program that restricts the flow of US investment dollars that comes with know-how and expertise into certain and specific sectors and sub-sectors of concerns such as advanced semiconductors, artificial intelligence, and quantum computing that can be used by countries of concern in this case, particularly the PRC for the benefit of their military intelligence capabilities, and mass surveillance,” Rosen said.

The program, according to Rosen, is being crafted in a manner that makes it easy and digestible for the business community and administrators.

The US is also holding a dialogue with major allies, such as the EU, in order to highlight its concerns over national security posed by China.

The dialogue and concerns are being shared with other nations so that they can individually assess and take steps to address them, if necessary, Rosen said before the committee.

Rosen’s comments come at a time when the US and China are embroiled in a long-term battle to gain technology supremacy that has seen both nations take steps to thwart each other’s technology prowess.

The US first imposed restrictions on exports of chips to China in 2015, extending them in 2021 and twice in 2022. The most recent restrictions were introduced in December.

This move was followed by US convincing the Netherlands and Japan to implement a expand a ban on exports of chipmaking technology to China in January this year.

The ban, according to analysts, has hit Beijing’s plans to improve its domestic chipmaking prowess as the Netherlands and Japan are home to the world’s largest manufacturers of semiconductor building machinery and parts.

Following the deal with the US, Japan imposed a ban on the export of chipmaking technology to China last week, drawing flak from the Chinese government.

Japan’s decision to impose a ban came shortly after China banned the use of semiconductors manufactured by US-based chipmaker Micron, citing a cybersecurity issue.

The US Commerce Department has opposed the decision, saying the restrictions have no basis in fact.

Last week, lawmakers in the US said that Washington should look at imposing trade restrictions on Chinese memory chipmaker Changxin Memory Technologies as a counteroffensive to China banning the use of Micron’s chips.

While the Biden administration had earlier said that it was in talks with Beijing to repeal the ban on Micron, Rosen’s comments could well indicate that the discussions over repealing the ban might not be going the US’ way.

In the hearing, senators also sought clarity on the government’s efforts to limit the supply of US-origin goods to Chinese telecommunications major Huawei.

While exports to Huawei require a license, Washington is still analyzing the issue and is yet to formally revoke these licenses, Commerce Department assistant secretary Thea Rozman Kendler testified.

Kendler further said that Washington was monitoring exports to China and officials had rejected almost a quarter of export requests they received.

Last year, nearly 26% of 5,064 applications were reviewed and denied, Kendler wrote in testimony before appearing at the hearing.