The issuance of treasury bonds blocks American investors from helping China develop advanced military technology

WASHINGTON – The U.S. Treasury Department, seeking to prevent the Chinese military from gaining an advantage in advanced technologies, issued an order on Monday limiting and monitoring American investments in China in artificial intelligence, computer chips and quantum computing.

The final rule follows from executive order issued in August 2023 by President Joe Biden. The order was aimed at restricting access by “countries of concern” – particularly China, Hong Kong and Macau – to US dollars to finance technologies that could be used, for example, to break codes or develop next-generation fighter jets. It will come into force on January 2.

“U.S. investments … cannot be used to help affected countries advance their military, intelligence and cyber capabilities,” said Paul Rosen, assistant secretary of the Treasury for investment security. He noted that investments can mean more than just money; can provide “intangible benefits,” including management assistance and assistance in finding top talent and tapping into other sources of funding.

Blocking China’s high-tech ambitions is one of the few issues that enjoys broad support in Washington from both Republicans and Democrats.

In May, Biden imposed stiff tariffs on electric vehicles from China. He also imposed export controls to prevent the Chinese from acquiring advanced computer chips and the equipment to produce them. Former President Donald Trump has vowed to dramatically increase taxes on all imports from China if voters send him back to the White House.

Before releasing the final version, the Biden administration asked U.S. businesses and allies for comment.

In addition to blocking investments, the rule requires Americans and companies in the United States to notify the U.S. government of transactions involving “technologies and products that may contribute to threats to U.S. national security.”

Violators could be fined up to $368,136 or twice the value of the prohibited transaction, whichever is greater. The Treasury Department is creating an Office of Global Transactions that will oversee the new rule.