US set to limit scope of China investment ban with revenue rule

livemint.com:

A US plan to restrict investment in China is likely to apply only to Chinese companies that get at least half of their revenue from cutting-edge sectors such as quantum computing and artificial intelligence, people familiar with the matter said. The revenue provision would limit the scope of an executive order the Biden administration is expected to unveil in the coming days as part of a push to limit Chinese access to sensitive technology. The rule would allow US private equity and venture capital firms to put their money in larger Chinese conglomerates that may have artificial-intelligence divisions but get most of their revenue from other sources.

The people who detailed the current thinking about the order asked not to be identified discussing a proposal that has yet to be released. One of the people said the order will prohibit investments in AI for military end users while requiring notification for investments in other AI activity. It is expected to ban investments in some quantum computing activities, such as key encryption and sensing, as well as certain super-advanced semiconductors.

That person also said the order will take about a year to go into force given the time required for additional industry comments and rule-making. It won’t be retroactive so there wouldn’t be restrictions on investments made during that period. The White House declined to comment, and the Commerce and Treasury departments didn’t immediately respond to requests for comment.