U.S. Treasury Wants to Rein In Deals for Chinese Biotech and AI

The prohibitions from the Treasury Department could cut off Big Pharma from Chinese biotech. (Courtesy Merck)

Key Points

The U.S. Treasury proposes bans on American investment in Chinese biotech, artificial intelligence, and advanced memory chips.
The proposal also would extend investment bans on these sensitive technologies to ventures in Iran, Cuba, and Russia.
The restrictions could cut off a main source of new drugs for the pharmaceutical industry, though existing deals would not be affected.

The U.S. Treasury Department late Thursday proposed bans on American investment in Chinese biotech, artificial intelligence, and advanced memory chips. If adopted, the restrictions could cut off a main source of new drugs for the pharmaceutical industry.

The proposal would expand a current program that bans U.S. investments in Chinese AI, advanced processor chips, and quantum computing, which Treasury rolled out in January 2025. Treasury’s new proposal would also extend investment bans on the sensitive technologies to ventures in Iran, Cuba, and Russia.

Restrictions in the proposal vary from outright bans on certain investments, to requirements that investors notify Treasury on other investments. Buying stock in public companies will be exempt from the rules. Direct investments, joint ventures, and partnerships would be restricted.

The tougher rules ratchet up America’s economic and technology rivalry with China, while possibly complicating President Donald Trump’s effort to thaw relations with Russia.

Closer to home will be the impact on U.S. pharmaceutical companies. By some counts, drugs developed by Chinese biotech start-ups have accounted for three-quarters of the clinical trials initiated globally in the last few years. Many of the most exciting experimental treatments for cancer and autoimmune disorders were licensed from China.

Every multinational drug company from AstraZeneca , to Pfizer , to Roche Holding has China-licensed products in its pipeline. Merck is betting on a licensed antibody-drug conjugate to make up for lost revenue when its cancer blockbuster Keytruda goes off patent. Summit Therapeutics has bet its company on a licensed antibody that it hopes will leapfrog Keytruda.

Treasury’s proposal said it won’t affect existing deals. How it will block or burden future drug sourcing will be thrashed out before the rule becomes final.

Congress put a framework around Treasury’s first China investment restrictions with the December 2025 passage of the Comprehensive Outbound Investment National Security Act, or COINS. That law called for Treasury to extend investment bans to supercomputing and the hypersonic aerospace systems the enable missiles to travel at five times the speed of sound. It also said the administration could add other technologies that might pose military or security risks.

Along with supercomputing and hypersonic systems, the technologies added in the new proposal include the high bandwidth memory chips and advanced networking chips used in AI systems. Medical technologies added to the investment restrictions include brain computer interfaces, gene sequencers, and computing systems that automate scientific discovery or experimentation.

Treasury is inviting public comments on the proposal through Dec. 7. A final rule wouldn’t come until months later.

Write to Bill Alpert at william.alpert@barrons.com

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