The US Treasury Department has issued the Final Rule to further restrict US investment in Chinese AI and semiconductor technology.

The Final Rule relates to the executive order signed by President Biden in August 2023, titled: ‘Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.’

It blocks US firms and individuals from investing in certain technologies, products, and sectors that the government argues could be used by China in a military or intelligence capacity.

The bolstered regulations go into effect on January 2, 2025.

US China
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Under the terms of the Final Rule, anyone lawfully based in the US will have to notify the Treasury Department if they are engaged in business dealings “with persons of a country of concern involving a defined set of technologies and products that may contribute to the threat to the national security of the United States.”

Technologies and products now covered by the order include semiconductors and microelectronics, quantum information technologies, and artificial intelligence. Those found to be in violation of the order can be fined up to $368,136 or twice the value of the transaction, whichever is higher.

“Artificial intelligence, semiconductors, and quantum technologies are fundamental to the development of the next generation of military, surveillance, intelligence, and certain cybersecurity applications like cutting-edge code-breaking computer systems or next-generation fighter jets,” said Paul Rosen, assistant secretary for investment security.

He added: “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.”

Meanwhile, China has further strengthened restrictions on the export of rare earth minerals used for, amongst other things, semiconductor manufacturing.

According to a report from the New York Times, the Chinese government has expanded state ownership of mineral production facilities and starting October 1, now requires exporters to submit reports detailing how the shipments fit into the supply chain. The restrictions also now include antimony, in addition to germanium and gallium.

In August 2024, it was reported that Chinese export controls on semiconductor materials had already caused supply chain issues for Western manufacturers, with prices of germanium and gallium almost doubling in Europe during a 12-month period.

According to the US Geological Survey (USGS), China produces 98 percent of the world’s supply of gallium and 60 percent of germanium. Although the UGUS said that Chinese antimony mine production has fallen significantly over the past several years, it remained the leading global antimony producer in 2023, accounting for 48 percent of global antimony mine production.