The U.S. is advancing plans to limit investments in China's AI and tech sectors to protect national security and prevent the enhancement of China's military capabilities. The Treasury Department has released draft rules targeting specific sectors, including semiconductors, quantum computing, and artificial intelligence. The aim is to stop U.S. technology and expertise from boosting China's progress in these key areas.

The regulations focus on AI, with the U.S. aiming to restrict China from developing AI applications for military or mass surveillance purposes. The rules suggest bans on transactions involving AI systems trained with substantial computing power and require notifications about certain AI and semiconductor investments.

U.S. investors will face a more complex environment when investing in China, with the proposed rules requiring extensive due diligence. Exceptions are narrowly defined and extend to U.S. managed private equity and venture capital funds.

These rules are part of a wider strategy to protect U.S. national security and align with existing export controls. The ultimate goal is to prevent U.S. investments from aiding China in modernizing its military. The U.S. is also working with allies to address these investment risks, underscoring the global aspect of this initiative.