US escalates tech war with China

The US is stepping up its effort to cripple China’s advanced high-tech sectors.

What happened: The US government announced a new ban on certain investments in China’s quantum computing, advanced semiconductor, and artificial intelligence sectors. 

  • The rules are set to take effect next year, will only apply to new American investments made in these sectors, and could apply to other countries in the future.

Why it’s happening: The move comes amidst (say it with us now) growing political tensions. The US has taken steps since last year to hinder Chinese development of tech that could be used for military applications—most notably, a ban on high-end chip exports

Why it matters: The decision is likely to have a chilling effect on overall Western investment in China, as businesses worried about further restrictions take a wait-and-see approach.

  • America’s allies will likely also feel pressure to enact their own investment rules.

  • The UK, Germany, and the European Commission are reportedly into the idea, while Japan has apparently told US officials they have no plans to change any legislation.

In Canada: The Departments of Innovation and Global Affairs and Finance are “in close contact with their US counterparts” regarding the new rules, but did not say whether the federal government plans to introduce similar restrictions. 

  • Late last year, the feds proposed changes to Canada’s rules regarding foreign investment to better address security concerns concerning Chinese influence. 

Yes, but: Canada’s currently more concerned about Chinese money flowing into its critical minerals sector rather than Canadian money flowing out into China’s tech sector.—QH