AI Photo: VCG

The US has reportedly issued draft rules that would restrict and monitor US investments in China for artificial intelligence (AI), computer chips and quantum computing, a move that observers said on Sunday shows that Washington has been tightening its restrictions to stymie the development of China's cutting-edge technologies, with the scope of curbs expanding from export bans to more irrational areas that could result in dire global consequences.

Analysts warned that if the US continues weaponizing its so-called national security to target Chinese firms, it would disrupt the normal technological cooperation between the world's two largest economies and accelerate "decoupling" on the high-tech front. 

While voicing strong confidence in Chinese firms' abilities to make technological breakthroughs, observers stressed that such US suppression won't achieve its desired results and would only shoot US companies in the foot.

The US Treasury Department published the proposed rules and a raft of exceptions after an initial comment period following an executive order signed by US President Joe Biden last August,  Reuters reported. 

Treasury Assistant Secretary for Investment Security Paul Rosen was quoted as saying in the Reuters report that the proposed rules aim to ensure the claimed national security of the US. Multiple forms of investment are put under scrutiny, including US-managed private equity and venture capital funds, as well as some US limited partners' investments in foreign managed funds and convertible debt.

Public comments on the proposed rules will be accepted until August 4, and the US is on track to implement the regulations by the end of the year as anticipated, Reuters reported. 

"The US is announcing new restrictions for several reasons. First, it is getting more anxious over China's advances in related technological fields despite its relentless crackdown. Second, Washington found that US companies, regardless of the ban, are eager to build more cooperation with the Chinese side, and it has to coerce the implementation of more orders to stifle" this trend, Ma Jihua, a veteran telecom industry observer, told the Global Times on Sunday.

Analysts said that though the US is banking on its latest actions to generate a substantial impact on China's technology companies, such as the share prices of AI-related firms diving, it is unlikely that these malicious attempts could delay the technological progress of the world's second-largest economy.

Bloomberg reported on Wednesday that Alan Estevez, US under secretary of commerce for industry and security, will visit Japan and the Netherlands to press his counterparts in Tokyo and The Hague to put more limits on the activities in China of Dutch supplier ASML Holding NV and Japan's Tokyo Electron. 

Estevez will highlight restrictions on China's production of high-bandwidth memory chips, for which the two companies are suppliers.

Zhou Mi, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Sunday that the "decoupling" move by the US in the name of the so-called national security would lead to a decline of global investors' confidence in the American business environment. 

"It is against international rules and it disrupts the normal market order. Meanwhile, it would also trigger global concerns on tech supply chain stability and dampen the global innovation dynamic," Zhou said.

China's Foreign Ministry on Wednesday also slammed the US restriction as a move that was "aimed at perpetuating its supremacy." 

"It is denying China's legitimate right to grow and thrive. In order to take exclusive control of the top end of the value chain, the US would go so far as to destabilize global industrial and supply chains. This will not only handicap the global semiconductor industry, but also eventually backfire and do nobody any good," China's Foreign Ministry spokesperson Lin Jian said. 

In October 2023, the Biden administration announced measures to block China, among other countries, from buying high-end AI chips designed by Nvidia and others, the BBC reported. 

Ma stressed that in the sectors of AI and chips, the US was left with only a few cards to play to continue its blockade against China.

Chinese companies are striving to close gaps with foreign rivals in the hot spot of AI large language model development. It is estimated that by 2030, China will achieve as much as $7 trillion more in GDP thanks to the development of AI, which would be equivalent to 40 percent of its total GDP that year, according to a report by consultancy PwC. That would make China one of the global economies that benefits the most from AI.