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US coming up with new rules to stop investors from funding Chinese companies

The US administration is reportedly developing a new programme that could prohibit US participation in certain Chinese sectors. The move is seen as an attempt to protect American technological advantages in the escalating rivalry between the two countries.

People familiar with the programme expect it to cover private equity and venture capital investments in advanced semiconductors, quantum computing and some forms of artificial intelligence. The aim is to stop American investors from providing funding and expertise to Chinese companies that could improve the speed and accuracy of Beijing’s military decisions.

According to reports provided to lawmakers on Capitol Hill on March 3, the US Treasury and Commerce departments are considering a new regulatory system to address US investment in advanced technologies abroad that could pose national security risks. The reports did not mention specific technology sectors that the Biden administration considered risky, but it was noted that sectors that could advance rivals’ military capabilities would be a focus of the programme.

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The programme would focus on “preventing US capital and expertise from being exploited in ways that threaten our national security while not placing an undue burden on US investors and businesses,” according to the US Treasury department report.

The reports did not mention the names of countries that would be placed under the new rules, but it is expected that the Biden administration’s work on the new rules would in practice largely deal with US investments in China.

The US Treasury and Commerce departments are expected to finalise their policy on the issue in the near future and seek additional resources for the investment programme in the White House budget, due to be released next week. The new programme will be subject to public comment, and the Treasury will administer it in consultation with the Commerce Department.

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The rules regulating US investment in other nations will be part of a broader effort by the Biden administration to impact China’s ability to create technologies that US officials believe could pose a national security risk.

In 2022, the US government announced export restrictions on advanced semiconductors and chip-manufacturing equipment aimed at slowing China’s military advance. The US government has been working on an executive order establishing the new investment rules for months.

US Deputy Treasury Secretary Wally Adeyemo recently said that Washington should set up the investment programme rules to address national security risks and not create unfair economic advantage. Adeyemo made the remarks at a recent public event.

(With ANI inputs)

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