The U.S. Treasury Department has proposed rules that would bar some American investments in Chinese artificial intelligence, semiconductor, quantum and other advanced technology companies and require advance notice of others, The Associated Press reported Friday. For venture capital and private equity firms, corporate venture arms and companies with overseas subsidiaries, the draft means more formal screening of deals and real penalties for missing a filing.
What Happened
Treasury issued a notice of proposed rulemaking, a draft regulation published for public comment, on Oct. 22, according to its release "Treasury Issues Proposed Rule to Implement Comprehensive Outbound Investment National Security Act." The rule would update the Outbound Investment Security Program, which screens U.S. money flowing into sensitive foreign technology businesses, to carry out the COINS Act, passed in December 2025 as part of the annual defense authorization law.
Under the law, U.S. persons must notify Treasury of certain deals with covered foreign persons working in "notifiable" technologies, and certain deals involving "prohibited" technologies are banned outright. The law names five areas: semiconductors and microelectronics, AI systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. Treasury said it added biotechnology using its authority to cover other technologies that support a country of concern's military, intelligence, surveillance or cyber capabilities.
The draft also addresses foreign entities controlled by U.S. persons, excepted transactions, what investors must include in a notice, a way to get nonbinding feedback from Treasury, and a knowledge standard that requires a "reasonable and diligent inquiry" into a deal. It sets out violations and penalties.
According to the AP report by Paul Wiseman and Didi Tang, the rule covers China, Russia, North Korea and other countries of concern, and the underlying law also names Cuba and Iran. It applies only to investments above $50,000 and would exclude many financial investments, including purchases of stock. The AP noted that Treasury's text uses the term "superintelligence" for AI systems. Treasury's program page sets a Dec. 7, 2026, deadline for comments.
"Under President Trump's leadership, we are committed to putting America's national security first," Treasury Secretary Scott Bessent said in the release.
Why It Matters
For boards, the practical change is that outbound deal review becomes a standing compliance function rather than an occasional legal check. Investors must assess not only the companies they back directly but also deals made by entities they control. Jason Chipman of the law firm WilmerHale told the AP the rule "will require more substantial compliance programs to manage risk."
Enforcement is already real. The AP reported that in July Treasury fined a U.S. company $200,000 because one of its subsidiaries did not report a $92,500 investment in a Chinese AI and robotics company.
The addition of biotechnology extends the program well beyond the chip and AI deals that drew attention when it began. Life sciences funds and pharmaceutical companies with China partnerships now face the same screening questions as technology investors.
Context
The program began with a 2023 executive order from President Joe Biden that restricted U.S. investment in Chinese semiconductor, quantum and AI businesses, the AP reported. Congress put it into law and widened it to more technologies and countries in December 2025.
China's Foreign Ministry spokesperson Mao Ning criticized the move and said China would take necessary measures, according to the AP.
What to Watch
The comment period, which closes Dec. 7. Treasury said final regulations will come later and will set the date the obligations take effect. Ryan Majerus of King & Spalding told the AP this is the first step in a long process and expects later changes to be more enforcement-minded. Watch also for any countermeasures from Beijing.
