Following Washington’s suggestion to establish a set of specific regulations that would hinder and track American investments in China for semiconductors, artificial intelligence, and classical computing, Beijing has expressed major problems.  ,
The Chinese Commerce Ministry stated on Monday that, despite the US’s repeated efforts to say it has no intention of dissociating from China or preventing the country’s economic growth, Washington has insisted on preventing American firms from investing in China and preventing the government’s normal growth.  ,  ,
A spokesperson for the government referred to the meeting between Chinese President Xi Jinping and US President Joe Biden in the US in November as” a typical broad approach to national security,” saying that this method goes against the two faces of state’s discussion at the conference in San Francisco.
He predicted that the restrictions may have a negative impact on Chinese and US businesses ‘ regular economic and trade cooperation, undermine the world’s economic and trade balance, and deteriorate global commercial and supply chains ‘ security and stability.
He added that China is entitled to take the same actions as the United States is against. He demanded that the US government prevent politicizing and stifling business.
Researchers at the Ministry of Commerce, Zhou Mi, predicted that Washington’s purchase regulations will make high-tech cooperation between the US and China more difficult. He claimed that it will also stifle global technical innovation and scientific advancement.  ,
Beijing made the comments after the US Treasury Department released a notice of proposed rule-making ( NPRM ) on June 21 to implement Biden’s executive order, which was first announced in August and had the title” Addressing US investments in specific national security technologies and products in countries of concern.”
According to the Treasury, the NPRM establishes a procedure for creating a new federal security software to combat threats from foreign direct investments in China, Hong Kong, and Macau.
The proposed NPRM developments our national security by preventing, according to Paul Rosen, assistant secretary of the Treasury for Investment Security, the numerous benefits that some US opportunities offer besides only capital from supporting the development of delicate systems in nations that might use them to harm our national security.
The Treasury requests comments on the proposal through August 4 and anticipates that the regulation will be in effect by the end of this year.  ,
The secretary of the Treasury must enact laws that prohibit US citizens from operating AI, chip, and quantum computing businesses in China, according to Biden’s executive order.  ,
Additionally, the regulations should mandate that US citizens notify the Treasury of specific other transactions that might involve these products and technologies that could compromise US national security.
The NPRM said a” covered transaction” may be a prohibited transaction, or only a notifiable one.  ,
Covered transactions include the provision of debt financing, the conversion of convertible debt, greenfield investments ( a type of foreign direct investment where a company establishes operations abroad ), joint ventures, and limited partner ( LP ) or equivalent investments.
China’s FDI
The Chinese Commerce Ministry reported on June 21 that its total foreign direct investment decreased by 31 % to US$ 57.9 billion in the first five months of this year from US$ 84.3 billion during the same time period in 2023.  ,
FDI in China’s high technology manufacturing sector rose 2.7 % to US$ 6.9 billion. FDI coming from Germany and Singapore to China rose 24 % and 16 % year- on- year, respectively. However, the commerce ministry did not make the detailed FDI figures available for each country.  ,
China’s high technology development certainly needs the participation of foreign funds, but it mainly relies on domestic funds and policy environment, said Xiang Ligang, director- general of the Zhongguancun Information Consumption Alliance, a Beijing- based telecom industry association.
China must now send a clear message that it needs to develop its own AI technology, according to Xiang, who stated that the proposed US investment restrictions were a result of this. He made mention of Beijing’s recent national policy to support Chinese technology startups.
On June 15, China’s State Council published a document to encourage local governments, state- owned- enterprises, banks, private equity and asset management firms and long- term fund management companies to provide loans, subsidies and funds to technology startups.
According to the statement, financial authorities should foster a favorable lending climate for technology companies to grow and raise money. China will tweak its laws in order to promote FDI, according to the statement.  ,
In an article published on June 23, Guan Quan, a professor at the Renmin University of China, writes that the US has recently sent an official to Japan and the Netherlands and urged them to tighten their export controls for chip-making equipment.  ,
Besides, he says, Washington also plans to add 11 Chinese chip foundries to its Entity List. He says all these moves have shown clearly , that the Biden administration will not stop suppressing China’s chip sector.
He claims that until one day China can self-supply all the necessary chip-making tools, the only way to put an end to all these restrictions is to use technological advancements. However, Guan did not provide a roadmap or schedule for how China would go about accomplishing its objectives.
Chinese students repatriated
China can still use this opportunity to attract American investments into its high technology sectors, according to some commentators, because it may take up to six more months before the proposed US investment restrictions go into effect.  ,
Meanwhile, the immediate effect of imposing a ban on Chinese students from studying or obtaining AI technology in the US is.  ,
On June 22, China Daily, a state- owned publication, reported that four Chinese students who traveled to the US for academic conferences had recently suffered from the US border officers ‘ “unwarranted harassment, interrogation and repatriation” . ,
Border agents questioned the four science students, two of whom have research interests in AI, about their personal and family histories and whether they were affiliated with the Chinese Communist Party, according to the report.  ,  ,
It said the US has repatriated more than 30 Chinese students, mostly master’s or doctoral degree candidates in computer- related fields, in recent years.
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