On Friday last week the Treasury Department elaborated on a proposed rule aimed at restricting and monitoring U.S. investments in China, specifically in the fields of artificial intelligence, computer chips, and quantum computing.

This proposed rule is a result of President Joe Biden’s August 2023 executive order, which addresses the access “countries of concern” have to American funding for advanced technologies. The U.S. government asserts that such funding could enhance these countries’ military, intelligence, surveillance, and cyber capabilities. China, Hong Kong, and Macau were identified as countries of concern in the order.

The Biden administration is working to hinder the development of technologies in China, the world’s second-largest economy, that could provide a military advantage or allow dominance in emerging sectors such as electric vehicles.

In addition to the proposed rule, President Biden has imposed a substantial tariff on Chinese electric vehicles. This move has political implications as both Biden and Republican Donald Trump seek to demonstrate to voters who can better confront China, a geopolitical rival and significant trading partner.

The proposed rule specifies the information that U.S. citizens and permanent residents must disclose when participating in transactions in this sector, as well as what would constitute a violation of the restrictions.

According to a senior Treasury official, the rule would specifically prohibit American investors from funding AI systems in China that could be used for weapons targeting, combat, location tracking, and other military applications. This official provided an overview of the rule to reporters on the condition of anonymity.

The Treasury is soliciting comments on the proposal until August 4, 2024, after which a final rule is expected to be issued.