Home Business Recent Updates on Foreign Investment Restrictions and Export Controls Governing Semiconductors, Quantum Computing and Artificial Intelligence (AI)

Recent Updates on Foreign Investment Restrictions and Export Controls Governing Semiconductors, Quantum Computing and Artificial Intelligence (AI)

by Janessa Lee

The recent visit of US Secretary of Commerce, Gina Raimondo, to China has shed some light on the evolving trade relationship between the two countries. While acknowledging the importance of not severing ties with China, Raimondo made it clear that the US would not compromise on matters of national security. This visit has provided valuable insights into the future direction of US policy towards China.

In recent years, the US has imposed significant restrictions on trade with China. This includes restrictions on the export of advanced computing chips to China and Russia, citing concerns about their use in military modernization efforts. The US Department of Commerce’s Bureau of Industry (BIS) is considering further amendments to its regulations, including additional limitations on cloud computing services that provide China-based users with access to advanced chips.

The Biden Administration has also issued an Executive Order on outbound investment, which paves the way for regulations that would require notifications or even prohibit certain investments in countries of concern, including China. Semiconductors, quantum computing, and artificial intelligence (AI) are identified as primary areas of focus. There are indications that Congress is also considering outbound investment regulation, further highlighting concerns about technology transfer and the competitiveness of US firms.

In January 2023, the US House of Representatives established the House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party. The committee has launched investigations into US investments and business relations in China, with a strong emphasis on keeping advanced semiconductors out of China’s reach.

However, despite the increasing complexities of engaging in trade with China, many US companies still express a desire to do business in China and access its market. This demonstrates the importance of finding a balance between economic interests and national security concerns.

The limiting of semiconductor exports to China has attracted comments and criticism from various stakeholders. While initially, these restrictions may limit China’s ability to develop AI products in the short term, there are concerns about the long-term impacts of overly broad restrictions. These include China’s potential to develop its own capabilities, reduced visibility on technology developments in China, and the displacement of US technology globally.

China, in response to the export restrictions, has highlighted the potential adverse effects on global industrial and supply chains, as well as the world economy. To support its domestic semiconductor industry, China has launched a $40 billion investment fund, the China Integrated Circuit Industry Investment Fund. This fund aims to make China self-sufficient in semiconductor production and reflects the government’s commitment to building up its own capacity in the face of international restrictions.

Companies that may be impacted by future outbound investment regulations have the opportunity to submit comments and feedback to the Department of Treasury before the deadline. Engaging with members of Congress and participating in discussions on AI regulation can also provide companies with opportunities to influence policy decisions.

The visit of Secretary Raimondo to China represents an important moment in the evolving trade relationship between the US and China. It demonstrates the US government’s commitment to safeguarding national security while acknowledging the desire of US companies to engage with the Chinese market. As policies continue to evolve, it is important for companies to stay informed and engage with relevant stakeholders to navigate the changing landscape of US-China trade.

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