US Treasury Proposes Expanded Rule to Restrict High-Tech Investments in Countries of Concern

US Treasury Expands Investment Restrictions Targeting Countries of Concern

The US Treasury Department unveiled a proposed outbound investment rule Thursday that significantly widens restrictions on American high-tech investments in China, Russia, North Korea, and other countries of concern1

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. The draft regulation implements the Comprehensive Outbound Investment National Security Act passed by Congress in December 2025, marking a substantial escalation in Washington's effort to prevent adversaries from leveraging U.S. capital to develop military-relevant technologies3

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. Treasury Secretary Scott Bessent stated the proposed regulations would strengthen the existing Outbound Investment Security Program to prevent adversaries from using U.S. investment to develop critical technologies that threaten national security2

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From Executive Order to Congressional Mandate

This initiative builds on groundwork laid in 2023 when then-President Joe Biden signed an executive order restricting outbound U.S. investments in Chinese semiconductors, quantum computing, and artificial intelligence1

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. Treasury subsequently established the Outbound Investment Security Program to operationalize these controls. The December 2025 congressional law codified and expanded this framework, targeting additional technologies and broadening the list of restricted nations beyond China to include Cuba, Iran, North Korea, and Russia4

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. Notably, the inclusion of Russia comes just days after President Donald Trump waived sanctions on Russia following a diesel deal with President Vladimir Putin5

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Expanded Technology Coverage and Superintelligence Terminology

The proposed rule expands investment restrictions to cover hypersonic systems capable of traveling at five times the speed of sound, supercomputing, biotechnology, and artificial intelligence1

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. In a notable linguistic shift, Treasury adopted Trump's preferred terminology, replacing "AI systems" with "superintelligence" or SI throughout the regulation2

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. Treasury exercised its authority under the act to add biotechnology to the restricted sectors, despite it not being explicitly named in the original congressional mandate2

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. The draft also eliminates the current option for investors to simply report certain superintelligence deals, instead imposing an outright ban on such investments2

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Investment Thresholds and Compliance Requirements

The restrictions on high-tech investments would apply only to deals exceeding $50,000 and would exclude many financial investments, including stock purchases3

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. U.S. investors would be required to notify Treasury about certain transactions, while others would be prohibited entirely2

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. Jason Chipman, a former Justice Department lawyer specializing in cybersecurity and investment rules at WilmerHale, noted the new rule "will require more substantial compliance programs to manage risk"1

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. Violations could trigger civil penalties up to the maximum allowed under the International Emergency Economic Powers Act, and Treasury could force investors to divest2

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Geopolitical Context and US-China Tech Rivalry

Since Trump's first term, the United States and China have been locked in an intensifying economic and tech rivalry3

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. Both nations have restricted exports of sensitive technology and critical products—China's rare earth minerals and America's advanced computer chips—while imposing tariffs on each other's goods4

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. Trump and Chinese President Xi Jinping agreed last year to ease tensions during talks, extending a temporary truce into January, yet the sparring continues5

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. In July, Treasury issued a $200,000 fine against a U.S.-based company for failing to report a $92,500 investment in a Chinese artificial intelligence and robotics company1

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. China's Foreign Ministry responded to the proposal by stating the U.S. should abide by market economy principles and stop interfering in normal business cooperation, with spokesperson Mao Ning warning that "overstretching the concept of national security" serves no one's interests3

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Strategic Implications and Timeline

Craig Singleton, a senior fellow at the Foundation for Defense of Democracies, emphasized that the proposed rule "sends an important signal to markets that Washington is tracking where U.S. capital is flowing and what capabilities it is helping build"1

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. The screening of outbound investments "recognizes that capital can accelerate military-relevant capabilities just as surely as technology transfer can," Singleton noted4

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. Former U.S. trade official Ryan Majerus, now a partner at King & Spalding, characterized the announcement as "just the first step in a fairly long process" toward more enforcement-minded changes that will "put more teeth behind the outbound investment program"1

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. The Federal Register will publish the draft on October 26, with written comments due by December 7 before Treasury issues final rules and sets an implementation date2

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