The US government might start scrutinizing informal partnerships between US and Chinese companies in the field of artificial intelligence (AI), threatening practices that have long been considered garden-variety development work for technology companies, sources familiar with the discussions said.
So far, US government reviews for national security and other concerns have been limited to investment deals and corporate takeovers.
This possible new expansion of the mandate — which would serve as a stop-gap measure until the US Congress imposes tighter restrictions on Chinese investments — is being pushed by members of Congress and those in US President Donald Trump’s administration who worry about theft of intellectual property and technology transfers to China, four people familiar with the matter said.
AI is a particular area of interest because of the technology’s potential for military use, they said. Other areas of interest for such new oversight include semiconductors and autonomous vehicles, they added.
These considerations are in their early stages, so it remains unclear if they are to move forward, and which informal corporate relationships the initiative would scrutinize.
Any broad effort to sever relationships between Chinese and US tech companies, even temporarily, could have dramatic effects across the industry.
Major US technology companies, including Advanced Micro Devices Inc, Qualcomm Inc, Nvidia Corp and IBM Corp, have activities in China ranging from research labs to training initiatives, often in collaboration with Chinese companies and institutions that are major customers.
Top talent in areas including AI and chip design also flows freely between companies and universities in both countries.
The US government could nix the cooperation between US and Chinese companies through an executive order from Trump by invoking the International Emergency Economic Powers Act.
Such a move would unleash sweeping powers to stop or review informal corporate partnerships between a US and Chinese company, any Chinese investment in a US technology company or the Chinese purchases of real estate near sensitive US military sites, the sources said.
“I don’t see any alternative to having a stronger [regulatory] regime because the end result is, without it, the Chinese companies are going to get stronger,” said one of the sources, who is advising US lawmakers on efforts to revise and toughen US foreign investment rules. “They are going to challenge our companies in 10 or 15 years.”
James Lewis, a former foreign service officer with the US Departments of State, who is now with the Center for Strategic and International Studies, said if the emergency act is invoked, US government officials, including those in the US Department of the Treasury, could use it “to catch anything they want” that falls outside the scope of the regulatory regime.
A White House official said that they do not comment on internal administration policy discussions, but added: “We are concerned about ‘Made in China 2025.’ Particularly relevant in this case is its targeting of industries like AI.”
“Made in China 2025” is an industrial plan outlining China’s ambition to become a market leader in 10 key sectors, including semiconductors, robotics, drugs, devices and “smart” green cars.
Last month, the White House outlined new import tariffs that were largely directed at China. That prompted the Chinese government to retaliate with sanctions against the US.
Those moves followed proposed legislation that would toughen foreign investment rules overseen by the Committee on Foreign Investment in the United States (CFIUS), by giving the committee purview over joint ventures that involve “critical technology.”
US lawmakers who put forth the proposal in November last year said the changes are aimed at China.
Whereas an overhauled CFIUS would likely review deals relevant to national security and involve foreign ownership, informal partnerships are likely to be regulated by revised export controls when they come into effect, sources said.
To be sure, sources said the Trump administration could change its mind about invoking the emergency act.
Some within the treasury department are also lukewarm about invoking the emergency act as they would prefer to focus on passing the revised rules for CFIUS, they said.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
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