In a decisive move, the Biden administration is blocking companies from selling personal information to countries like China and Russia. Starting today, a set of strict rules will prevent data brokers and other businesses from transferring sensitive data to six nations flagged as security threats. This comes as tensions rise between the U.S. and these countries, especially over AI and cybersecurity concerns.
Under the new regulations, data brokers and companies managing large datasets will no longer be able to sell information like financial records, health data, or biometric info to buyers in China, Russia, Iran, North Korea, Cuba, or Venezuela. If the datasets include info about more than 10,000 Americans, that sale is simply off the table. These changes aim to curb foreign access to American data, which could be used for things like hacking or political meddling.
Why This Matters
With privacy risks growing and AI becoming a key battleground, the U.S. has decided to close loopholes that allowed other nations to access critical data. Data brokers, in particular, have operated without much oversight, selling everything from location data to medical records to the highest bidder.
The new rules, which were published today by the Department of Justice (DoJ), are designed to stop this practice cold when it involves sensitive information being sent to foreign countries. The regulations were outlined in a February 2024 executive order signed by President Biden, targeting foreign adversaries who could misuse personal data for espionage or cyberattacks.
Ramping Up the Data Privacy Game
The order specifically warned that data brokers were selling personal info to countries that don’t exactly have America’s best interests at heart. The White House pointed to the national security risks posed by allowing foreign actors access to U.S. citizens’ sensitive personal data, including data on military personnel. The executive order aimed to block these transactions, and now the administration is making sure those rules have teeth.
As part of the new rules, selling more than 1,000 Americans’ geolocation data or biometric data, or more than 100,000 Americans’ personal identifiers, will be prohibited. It includes things like names linked to Social Security numbers or device IDs. Violations of these rules could result in heavy penalties, including fines or even criminal charges for those who try to bypass the restrictions.
Data Brokers Brace for Change
Data brokers, which collect and sell large volumes of personal information, will have to dramatically change how they operate. Previously, they could sell U.S. citizens’ data without much concern for who was buying it or where it would end up. But now, with the new thresholds in place, brokers will need to pay close attention to who their customers are, or they’ll face serious consequences.
It’s not just the sale of data that’s restricted, either. The rules also ban transferring data through business deals like cloud service contracts, mergers, or other partnerships involving companies from the six blacklisted countries. For example, U.S. firms that process data through a company based in China or hire subcontractors from Russia will need to follow these restrictions or face penalties.
China’s AI Spending Surges Despite Sanctions
While the U.S. is tightening the screws on data transfers, China’s tech sector is surging ahead with AI investments. Chinese giants like Alibaba, Tencent, and ByteDance have spent billions on AI infrastructure, despite U.S. export controls aimed at slowing their progress. In just the first half of 2024, Chinese companies invested over $7 billion in AI infrastructure, doubling what they spent last year.
Alibaba dominates AI investment scene in China! 🚀 Leveraging computing prowess, it spearheads with $800M Moonshot AI deal, half powered by cloud credits. A seismic shift in tech investment landscape! #Alibaba #AIInvestment #MoonshotAI r/martechnewser pic.twitter.com/b5NXgNVaS8
— PUPUWEB Blog (@cheinyeanlim) May 12, 2024
Alibaba, for instance, increased its capital expenditures by 123% year over year, focusing heavily on acquiring processors to power its AI models. Tencent also boosted its spending by 176%, with an emphasis on servers to support its growing cloud business. ByteDance, which operates TikTok, has been a major buyer of Nvidia’s processors, which are compliant with U.S. restrictions but still allow significant AI development.
U.S. Steps Up Countermeasures
The Biden administration’s new rules are part of a larger strategy to limit the reach of China and other adversarial nations in sensitive tech sectors. Beyond banning data sales, the U.S. has restricted exports of high-performance AI chips, which are essential for training advanced AI models.
These measures, which began in October 2023, are designed to prevent the use of American technology in China’s military developments. Additionally, the Biden administration has placed numerous Chinese firms on a blacklist, tagging them as national security risks, with the potential for these regulations to be broadened further.
In response to US restrictions on AI chips, China in 2023 set bold plans to bolster its own manufacturing capabilities. The MIIT’s recently released “Opinions on Manufacturing Reliability Improvement” report outlines a plan to address the shortcomings of basic product reliability and enhance the quality of core components in three industries: machinery, electronics, and automotive.
The MIIT’s proposed plan outlines a two-tiered strategy to enhance manufacturing reliability. Phase one, scheduled for completion by 2025, prioritizes fortifying the groundwork and refining existing services. The objective is to establish at least 100 exemplary demonstrations of reliability improvement and to incentivize more than 1,000 enterprises to adopt reliability enhancement initiatives.
US’ broader AI chip and chip-making tool export curb on China is pure hegemony in science and technology. The US wants to keep China and other developing countries at the lower end of the industrial chain forever, which is not constructive: Chinese FM spokesperson pic.twitter.com/yJyq3PL1eC
— Zhang Meifang (@CGMeifangZhang) September 14, 2022
In China, the aggressive approach from the U.S. has drew criticism. For example, Zhang Meifang is a Chinese diplomat who is serving as the Consul General of the People’s Republic of China in Belfast, United Kingdom since 2018, claimed the U.S. was trying to dominate the market.
Phase two, anticipated to conclude by 2030, centers on setting industry benchmarks, bolstering driving forces, and fostering transformative change. The aim is to elevate the reliability of 10 pivotal core products to international standards of excellence, cultivate a cohort of highly competitive and influential reliability public service institutions and professionals, and propel the overall level of manufacturing reliability in China to new heights.
Intel’s Troubles in China
In a separate but related development, Intel is facing scrutiny in China after a cybersecurity group linked to the Chinese government called for a review of its products. The group has raised concerns that Intel’s hardware may pose a threat to China’s national security. This comes just days after the U.S. restricted Chinese access to high-end AI processors, further straining the already tense relationship between the two countries.
Intel isn’t the only company feeling the heat. In recent months, the Chinese government has ramped up its efforts to reduce reliance on foreign technology, blocking some U.S. firms from selling critical components to Chinese manufacturers. These moves are part of China’s broader strategy to develop its own tech ecosystem and reduce its vulnerability to U.S. sanctions.
This month, Microsoft cut off Azure OpenAI Access for Chinese developers. Effective October 21, the service will be discontinued for non-enterprise customers due to escalating regulatory mandates imposed by the Chinese government. Consequently, developers will no longer have the option to utilize OpenAI tools within China via the Azure platform.
As the U.S. rolls out new regulations on data transfers, it’s clear that the tech war between the two superpowers is far from over. While China continues to build its AI infrastructure, U.S. policymakers are working to limit the flow of sensitive data and advanced technology to nations that could use them against American interests.