US curbs on investment in China to be limited by revenue rule - report
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A U.S. proposal to limit investment in China may apply only to Chinese companies which obtain at least half of their revenue from cutting-edge businesses such as quantum computing and artificial intelligence (AI), Bloomberg News reported citing people with knowledge of the matter.
The revenue provision would limit the scale of an executive order the U.S. government is anticipated to introduce in the coming days as part of its effort to curb China's access to sensitive technology.
The rule would allow U.S. private equity and venture capital firms to pump their money in larger Chinese conglomerates which may have AI units but get most of their revenue from other divisions, the report added.
The order will forbid investments in AI for military end users and require notification for funding in other AI activity. It is expected to curb investments in some quantum computing activities, such as key encryption and sensing, and certain super-advanced semiconductors, according to the report.
The rule would not be retrospective so that there curbs would not be on investments down previously. The order is likely to come into effect in about a year due to the time needed for additional industry comments and rule-making.
The final version of the order is expected to be far less ambitious than the early versions, and will likely only apply to new investments, the report added.
In July, Treasury Secretary Janet Yellen said the order will be "narrowly targeted" and would not have a "fundamental impact" on the investment environment for China.
However, China has spoken against proposed investment restrictions.
The provision on revenue would mean that Chinese companies most affected by the curbs would be early-stage Chinese startups, as per the report.
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