U.S. Treasury Proposes to Widen Outbound Investment Restrictions for China and Other Countries

The U.S. Treasury Department on Thursday proposed to expand existing outbound investment restrictions out of national security concerns, in a move set to further decouple venture capital ties between the U.S. and China.

The proposed regulation widens the scope to prohibit Americans from investing in certain areas of semiconductor and microelectronics technologies such as high-bandwidth memory chips, as well as all AI systems (or SI systems in the White House’s lingo) in several countries including China, Russia, North Korea, Venezuela, and Cuba. The existing rule only prohibits American investments in AI systems that use computing power above a certain threshold, and doesn’t strictly prohibit investments in AI applications or AI systems developed for robotics.

The proposed rule, which is open to public commentary until December 7, also seeks to restrict transactions in hypersonic systems and biotech, two sectors that aren’t covered by the existing rule that took effect in early 2025.

Treasury said the proposed rule was based on direction from Congress in the Comprehensive Outbound Investment Security Act, passed as part of the Fiscal Year 2026 National Defense Authorization Act.