Washington codified new limits on U.S. investment in Chinese tech, cementing a screening regime for American capital flowing into sensitive sectors and adding fresh authorities to curb funding that could aid Beijing’s military and surveillance ambitions.
President Donald Trump signed the Fiscal Year 2026 National Defense Authorization Act on December 18, 2025, a sprawling defense policy bill that includes the Comprehensive Outbound Investment National Security (COINS) Act. The measure locks into law an outbound screening framework first launched by executive order and subsequent Treasury regulations, and it empowers the administration to restrict or block certain transactions tied to Chinese entities in critical technologies. Chinese officials criticized the move as distorting normal investment flows. (archive.ph)
The law builds on Treasury’s Outbound Investment Security Program, whose final rule took effect on January 2, 2025. That rule targets three areas—advanced semiconductors and microelectronics, quantum information technologies, and artificial intelligence—by prohibiting some deals outright and requiring post-transaction notifications for others. It covers transactions with persons or entities in China, including Hong Kong and Macau, and is administered by Treasury’s Office of Global Transactions. The focus is on both capital and the “intangible benefits” that often accompany it, such as managerial expertise and talent networks. (home.treasury.gov)
Under the NDAA, Congress also gave the President sanctions-style tools under existing emergency economic authorities to cut off U.S. equity or debt from specific entities linked to China’s defense or surveillance technology ecosystems. Lawmakers say the aim is to prevent American savings from accelerating capabilities with military applications. (archive.ph)
For years, U.S. venture capital, private equity, and index funds helped finance China’s fast-rising tech sector. The new statutory footing signals that outbound capital controls are now a durable feature of U.S. national security policy, not a temporary experiment. AI, quantum and advanced chips are now clearly in the crosshairs, and dealmakers face higher diligence and reporting burdens to determine whether transactions are prohibited or notifiable. (home.treasury.gov)
Beijing has pushed back, warning the rules will chill investment, but bipartisan support in Washington has solidified. For now, companies should expect the existing Treasury rule to remain operative as agencies implement the NDAA provisions and consider any further adjustments. (apnews.com)
Compliance teams will need to map exposure to covered technologies and counterparties, build notification workflows, and monitor forthcoming guidance. Investors with China-facing strategies—particularly in early-stage AI and chip startups—will likely see elongated timelines and higher transaction costs as national security reviews become a standard pre-close checkpoint. (home.treasury.gov)