The Biden administration has finalized restrictions on US individuals’ investment in Chinese businesses. US individuals are now prohibited from investing in companies with advanced technology in China, including semiconductors, quantum computing, and artificial intelligence. The new rule, which came after a long deliberation of more than a year, banned investments in some Chinese companies while investments in other Chinese companies require the US government to be notified. The main goal here is to stop American capital and expertise from helping China develop critical technology which can ultimately lend a military edge to Beijing.
The Assistant Secretary for Investment Security, Paul Rosen, said, “US investments, including the intangible benefits like managerial assistance and access to investment and talent networks that often accompany such capital flows, must not be used to help countries of concern develop their military, intelligence, and cyber capabilities.”
The final framework, largely proposed in June, will take effect on Jan 2. It will also further clarify the government’s position on Chinese investments. For example, the rule and the ban apply to any investor looking to invest in advanced semiconductor chip manufacturing in China. However, the government only needs to be notified in case of an investment in legacy chip manufacturing. These ‘Legacy Chips’ are basically old chips which are used in a wide array of applications.
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The US had previously stopped the trade of advanced chips to China, and this restriction will further strangle the Chinese chip-making industry. This can very well be the start of the downfall of the Chinese chip making industry and can be an opportunity for South Asian countries like India, Vietnam and others.
