US plans wider curbs on China tech investment

The United States Department of the Treasury has proposed an expansion of restrictions on American investments in Chinese companies operating in artificial intelligence, biotechnology and other advanced technology sectors. Announced on October 22, the proposal is framed as a national security measure intended to keep US capital, business expertise and commercial connections from supporting technologies that could strengthen the military, intelligence or surveillance capabilities of foreign adversaries.

The proposal forms part of the existing outbound investment security programme, which began in January 2025 under a 2023 presidential executive order. The updated rules would add biotechnology to the list of restricted sectors and expand coverage of high‑performance computing and hypersonic systems, tightening controls on a broader set of dual‑use strategic technologies.

Under the proposed framework, certain investments would be prohibited outright, while others would be permitted but subject to mandatory reporting to the Treasury Department, generally within 30 days of completion. Ordinary purchases of publicly traded stocks and interests in investment funds would largely remain exempt from the regime, subject to specified conditions.

The revised plans would broaden restrictions on investments in AI companies, covering some transactions that previously only required notification. Treasury estimates that about 200 investment transactions a year could fall under the regulations, based on an analysis of roughly 300 investments made by nearly 230 US‑based investors over three years, adjusted for potentially unreported deals.

The measures would not be limited to China. The proposed expansion would extend the investment‑control programme to Cuba, Iran, North Korea and Russia, focusing on the development of sensitive technologies in countries classified as foreign adversaries by Washington.

China’s Ministry of Commerce has strongly criticised the US proposal and urged Washington to halt the expansion of outbound investment curbs. It said the rules would disrupt trade ties, damage bilateral economic relations and run counter to the consensus reached by the two countries’ presidents, who have met twice in the past six months.

Beijing described the proposed expansion as a discriminatory widening of China‑related investment restrictions and an intensification of existing curbs. Chinese authorities stated that they firmly oppose the measures and reserve the right to take unspecified countermeasures in response.

Despite the political tensions, the proposed rules exclude certain commercial arrangements already used by large US pharmaceutical companies in China. Drug‑licensing agreements in which firms such as Eli Lilly (LLY), Pfizer (PFE) and Bristol Myers Squibb (BMY) make cash payments for rights to medicines developed by Chinese companies, without taking equity stakes, are not expected to fall under the new restrictions.

The draft rules will be subject to a public consultation process before any final approval. Market participants and affected industries will have an opportunity to comment on the scope of covered technologies, the design of prohibited and reportable transactions, and the treatment of cross‑border investment structures.

The US Treasury has emphasised that the objective of the programme is to prevent US financing from aiding foreign adversaries’ development of dual‑use strategic technologies viewed as threats to US national security. At the same time, the continued exemption for most public‑market investments and specified commercial licensing deals signals an effort to balance security priorities with ongoing economic and trade relations.