The U.S. government is nearing the finalization of rules that will prohibit specific American investments in artificial intelligence (AI) in China, according to an official announcement. These restrictions are expected to be implemented shortly.
The upcoming regulations will mandate U.S. investors to notify the Treasury Department regarding certain investments in AI and other sensitive technologies. This initiative stems from an executive order signed by President Joe Biden in August 2023, aimed at preventing American technological expertise from bolstering China’s military capabilities.
Currently under review by the Office of Management and Budget, the final rules focus on outbound investments in China related to AI, semiconductors, microelectronics, and quantum computing. The review process indicates that the regulations could be released within the next week.
Laura Black, a former Treasury official and attorney at Akin Gump in Washington, speculated that the government aims to publish these rules before the upcoming U.S. presidential election on November 5. Black noted that the Treasury Department typically allows for a minimum 30-day period before new regulations take effect.
In June, the Treasury Department released proposed rules that included a range of exceptions, inviting public commentary on the matter. These draft regulations placed the onus on U.S. individuals and companies to identify which transactions would fall under the new restrictions.
A spokesperson for the Treasury Department declined to comment on the matter.
Black anticipates that the finalized rules will offer clearer guidelines regarding the scope of artificial intelligence regulations and the thresholds for limited partners. The proposed rules included bans on AI transactions for certain applications and those involving systems trained with specific computing power levels. Additionally, they required notification for transactions related to the development of AI systems or semiconductors that are not otherwise prohibited.
Notably, proposed exceptions included publicly traded securities such as index funds and mutual funds, as well as certain limited partnership investments and syndicated debt financing.
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