U.S. Administration efforts aimed at mitigating issues arising out of Beijing’s ‘Made in China 2025’

The U.S. Administration is increasingly boosting efforts to tilt, what has so far been so far in recent history, a one-sided affair, of collaboration and forced technology transfer from the U.S. to China. Beijing’s Made in China 2025 industrial policy has opened the administration’s eye to China’s furtive motives of leveraging the dual benefits of artificial intelligence for military purposes.

As per sources familiar with the discussions at hand, the Trump Administration may start scrutinizing the informal partnerships between forged by U.S. and Chinese companies in the field of artificial intelligence.

So far, the U.S. government’s efforts were restricted to concerns and threats emerging from a national security perspective and imposed limitations only on investment deals and corporate takeovers.

If the U.S. Administration moves ahead in this direction it would essentially serve as a stop gap solution until the U.S. Congress comes up with laws that tightens the screws on Chinese investments in the United States.

This expansion of the mandate is being pushed by members of the U.S. Congress and by members of the Trump Administration who worry about theft of U.S. intellectual property and forced technology transfer to China, said 4 sources familiar with the matter at hand.

Of particular interest is artificial intelligence since the technology has significant usage in the military. Other areas for new oversight includes autonomous vehicles and semiconductors, said the sources.

Significantly, any broad effort to severe relationships with China, even if its temporary, is likely to majorly impact a wide sector of U.S. tech companies, including Qualcomm, Advanced Micro Devices Inc, IBM and Nvidia Corp, all of which have training initiatives and research labs in China.

Further, the top talents in AI and chip designs flows freely between universities and companies from both countries.

If the Trump Administration were to cut this cooperation through an executive order by invoking sections from the International Emergency Economic Powers Act, the move would bring to a halt the majority of informal corporate partnerships between U.S. and Chinese companies, including Chinese investment in U.S. technology companies or China’s purchase of real estate near sensitive U.S. military sites, said sources.

“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 U.S. lawmakers on efforts to revise and toughen U.S. foreign investment rules. “They are going to challenge our companies in 10 or 15 years.”

According to James Lewis, a former Foreign Service officer with the U.S. Departments of State who is now with the Center for Strategic and International Studies, if the Administration were to invoke the emergency act it would enable U.S. government officials including, those in the Treasury Department, “to catch anything they want” that currently fall outside the scope of the regulatory regime.

As per a White House official who did not want to comment on speculation about internal administration policy discussions, “we are concerned about Made in China 2025, particularly relevant in this case is its targeting of industries like AI.”

Beijing’s ‘Made in China 2025’ outlays its industrial ambition to become a market leader in ten key sectors including robotics, semiconductors, devices, drugs and smart green cars.

According to sources, officials in the Treasury Department are lukewarm to invoking the emergency act and prefer to focus on passing the revised rules for CFIUS.

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