The proposal would extend restrictions to hypersonic systems, supercomputing, biotechnology and artificial intelligence, and would apply only to investments above $50,000.
Prohibited biotech technologies would cover pharmaceutical compounds and their delivery systems, plus brain-computer interfaces and biomanufacturing equipment.
Treasury will take public comments on the proposal before issuing a final rule, which POLITICO reports the law requires by March.
China's Ministry of Commerce said in October 2026 it had proposed banning sales of biopharma innovations to foreign buyers, limiting foreign access to licensing agreements.
The US Treasury Department proposed rules on Thursday, 22 October 2026, to put into effect the Comprehensive Outbound Investment National Security Act, which Congress passed in December 2025. The law requires notification of certain American investments in countries of concern and lets the government block some transactions. Those countries include China, Cuba, Iran, North Korea and Russia. The proposal would extend restrictions beyond semiconductors and AI to cover hypersonic systems, supercomputing and biotechnology.
Biotech is the sector drawing the most attention. The draft would define prohibited biotech technologies to include pharmaceutical compounds and their delivery systems, along with brain-computer interfaces and biomanufacturing equipment. Violators would face civil penalties and could be forced to divest from a prohibited technology.
The targeted transactions include acquisitions of equity interest, certain debt financing and entry into joint ventures. The rule would apply only to investments above $50,000 and would exclude many financial investments, including stock purchases. Treasury will take public comments before issuing a final rule, and POLITICO reports that the law requires the final rule to be finalized by March.
Treasury explained the rationale in its proposal:
“It is necessary to place restrictions in this sector in the interest of protecting U.S. national security”
The proposal also acknowledges that restrictions could carry costs, including significant public health risks and harm to US businesses in the sector. Treasury Secretary Scott Bessent said the measures aim to keep adversaries from using American money to develop critical technologies, while giving American and foreign investors more clarity.
Western drug companies have put tens of billions of dollars into Chinese biotech firms to fill their product pipelines, according to Axios. Bloomberg reports that US drugmakers are increasingly turning to China for new medicines, which could complicate financial ties between the two countries. Treasury says it is trying to balance encouraging promising innovation against protecting national security.
Craig Singleton, a researcher at the Foundation for Defense of Democracies, a US think tank, called the biotech restrictions the most significant element of the proposal, in remarks quoted by the Financial Times. He argued that biotech shapes the future of medicines and therapies, while some of the same technologies could strengthen China's military capabilities or deepen dependence on it.
China's Ministry of Commerce said in October 2026 that it had proposed banning the sale to foreign buyers of biopharma innovations, including domestic cell and gene therapy technologies. The ministry said the proposed rules would limit foreign access to licensing agreements but would not hamper normal international technological exchange and cooperation. An anonymous US drug industry lobbyist told POLITICO that the Chinese proposal appears to give Beijing levers to retaliate if Washington targets biotech deals.
The Chinese proposal is part of a package restricting foreign sales of some AI and photovoltaic technologies. It also fits a five-year plan for China's pharmaceutical industry, released in September 2026, that aims to make biopharma a "national pillar industry" alongside semiconductors.
Trump and Xi Jinping agreed in 2025 to ease tensions while talks continued, and at a summit in Washington they extended the temporary trade truce into January. The restrictions have a longer history: the program started in 2023, when then-President Joe Biden signed an executive order limiting outbound US investment in semiconductors, quantum computing and AI going into China.
The inclusion of Russia comes shortly after Trump waived sanctions on Russia following a diesel deal with Vladimir Putin. In July, Treasury issued a $200,000 fine against a US-based company that failed to report a $92,500 investment in a Chinese AI company. The public comment period comes before the final rule, which the law requires by March.
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The Treasury Department proposed the rules on Thursday, 22 October 2026, to implement a law Congress passed in December 2025. Biotech is one of several sectors that would face tighter limits on American money flowing to countries of concern.
AI text based on reports by Axios, Notícias ao Minuto, Observador and other publishers. Published .