The Trump administration is moving to restrict American investment in China's artificial intelligence, military technology, and life sciences sectors. The US Treasury Department has unveiled proposed regulations under the Comprehensive Outbound Investment National Security Act, which Congress approved in 2025 to tighten checks on investments in China, Russia, Iran, and other “countries of concern.” The proposal was announced by the Treasury.

US officials have long sought to cut rival nations off from the financial backing needed to modernize their armed forces. The move follows a parallel effort under former President Joe Biden, who issued an executive order limiting US capital flowing into China's AI, semiconductor, and quantum computing sectors. The Treasury subsequently launched the Outbound Investment Security Program (OISP), the regime the new proposal is set to reinforce. The program extends to overseas deals the kind of national-security screening that Treasury has long applied to foreign money entering the United States, turning the agency's traditional inbound focus outward. Background on the legislation is available from the Congressional Research Service.

Public comment required before final rules

The proposed rules target investments in advanced semiconductors, artificial intelligence, selected biotech-related materials and compounds, and technologies such as brain-computer interfaces. They apply only to investments exceeding $50,000, a comparatively low bar that brings a wide range of transactions into scope. Before the regulations are finalized, the Treasury will review public feedback on the proposal, a process that gives investors, companies, and legal experts a chance to weigh in on the definitions that will decide which deals are covered — and one that leaves the timing of a final rule open.

Craig Singleton, a senior fellow at the Foundation for Defense of Democracies, said the rules signal to global markets that Washington is keeping tabs on American capital flows and the specific advances they support. In his view, the added scrutiny reflects an understanding that cash injections can boost military power just as much as a technology transfer can.

“Biotech matters to both Wall Street and Main Street. It shapes the future of medicines and therapeutics, but some of the same technologies can also strengthen China's military capabilities or deepen US dependence on Chinese supply chains,” he asserted.

Treasury Secretary Scott Bessent expects that, once finalized, the regulations will reinforce the existing Outbound Investment Security Program and limit adversaries' ability to use US capital to develop critical technologies that endanger national security. He added that the rules would foster an “open investment environment.”

Ryan Majerus, a former US trade official who is now a partner at the law firm King & Spalding, framed the proposal as an early stage in a longer effort. “It's just the first step in a fairly long process to get to changes which presumably will be more enforcement-minded, to put more teeth behind the outbound investment program,” he said.

Greater scrutiny for US investors in sensitive tech

The proposal could also reshape how American investors evaluate opportunities in Chinese technology. For deals involving artificial intelligence, advanced computing, or biotechnology, firms may need to conduct additional due diligence to ensure their investments comply with the Treasury's rules, a shift that could raise compliance costs and lengthen transaction timelines. Venture capital and private equity funds, which typically hold equity stakes in early-stage technology companies, are among the investors most directly exposed to these obligations.

For Washington, the objective is to limit access to American funds that could support the development of technologies with military applications. The final regulations will determine the scope, reporting requirements, and enforcement process, and investors are expected to watch the Treasury's review closely to gauge how restrictions will work when transactions are subject to specific conditions.

Treasury fines Amidi LLC for OISP violation

Enforcement under the OISP has already produced penalties. In July, the Treasury Department levied a $200,000 fine on an American company after one of its subsidiaries failed to report $92,500 in backing for a Chinese AI and robotics firm, the penalty amounting to more than double the value of the undisclosed backing.

Amidi LLC had not disclosed its 2025 investment in Shanghai Qiongche Intelligent Technology Co. (Noematrix), a Chinese company working in artificial intelligence, robotics, and embodied intelligence. At the time, Assistant Secretary of the Treasury for Investment Security Christopher Pilkerton said the OISP was preventing rival nations from using American money to develop dangerous technologies.

In a more recent disclosure, the Treasury stated that Bank of America failed to file reports with the Financial Crimes Enforcement Network, the Treasury bureau that collects banks' suspicious activity filings under US anti-money-laundering law, on upwards of $5 billion in suspicious transactions. Part of that activity was tied to Chinese laundering networks operating along the US-Mexico border, the bank was further accused of breaching global sanctions programs linked to Iran, Russia, terrorism, and drugs.

A broader US-China standoff over technology and trade

The measures arrive amid a prolonged battle for economic and technological influence between Washington and Beijing that has persisted since Trump first took office. Both sides have restricted exports of critical materials and technologies — China limiting rare earth minerals, metals essential to electronics and defense hardware where it dominates global processing, and the US controlling exports of the advanced chips that underpin AI development — and both have imposed tariffs on each other's products.

Under the current arrangement, the two sides have agreed to slash or eliminate duties on $60 billion in products, split evenly at $30 billion between American exports to China and Chinese exports to the United States. The cuts offer relief across a range of merchandise, including fishing tackle, live horses, and camels. China's Commerce Ministry has stated that around 90% of goods on both ledgers will slide back to variable most-favored-nation baseline rates, the standard tariff levels applied outside preferential trade arrangements.

Source: Cryptopolitan