The U.S. is expanding restrictions on foreign investment in China, from current curbs on artificial intelligence to a ban on technology related to key Chinese weapon developments, according to a proposed Treasury Department rule made public Thursday.
The rule, once fully implemented, would block American venture capital firms, private equity firms and individual investors from funding Chinese companies likely to work on technologies that pose threats to American security.
The technologies include those used in “superintelligence” AI systems, quantum computers, advanced chips and supercomputers, hypersonic missiles and aircraft, and technologies related to gene therapies and toxin engineering, according to the notice.
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Another category of new investment restrictions listed in the notice includes a ban on any funding for research in brain-computer interface work — a key Chinese military development program for cognitive warfare designed to target both militaries and populations in a conflict.
The proposal shows the federal government is moving from restricting U.S. investment in a few semiconductor and AI technologies to a wider ban on other strategic Chinese technologies. How comprehensive the final ban is could affect U.S. startup companies, investors and pharmaceutical developers.
The Treasury action is part of a legal requirement to codify federal restrictions on money going to Chinese companies under the new Comprehensive Outbound Investment Security (COINS) Act, signed into law in December as part of the fiscal 2026 Defense Authorization Act.
Treasury Secretary Scott Bessent said the proposed rule is an important step balancing national security while promoting open investment and providing clarity to U.S. and foreign investors on a key national security concern.
“The proposed regulations would strengthen the existing Outbound Investment Security Program to prevent our adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security,” Mr. Bessent said.
The federal government already limits U.S. funding of certain Chinese tech companies under the Commerce Department’s entity list, a blacklist of foreign companies, and the Pentagon’s list of Chinese military-linked companies.
Treasury’s current rule restricts AI-related investment above a certain computing capability.
The new proposal calls for lowering the threshold with a ban on investment in developing any superintelligence system.
The change is based on an interagency determination that AI is advancing so rapidly that a broad prohibition on U.S. investment in China in that sector is needed.
If a proposed funding plan for China involves less sensitive technologies, investors are permitted to go ahead but must notify Treasury within 30 days of closing a deal.
Originally targeted solely against China, the new rule expands restrictions to include a ban on investment in Russia, Iran, North Korea, Cuba and Venezuela under the regime of former leader Nicolas Maduro.
The addition of hypersonics and biotechnology is a new target of the rule.
Jennifer Crook, a former CIA officer, said the new rule could have a major impact on U.S. national security, U.S. biotech investment, drug development and competition with China.
“America’s leadership in biotechnology is essential to our national security, economic competitiveness, and ability to develop new medicines,” said Ms. Crook, now executive director of the American Biosecurity Initiative.
The proposed restrictions need to address specific national security risks without unnecessarily discouraging investment, slowing innovation, or placing American companies at a competitive disadvantage, she said.
“Maintaining America’s biotechnology leadership must remain a central part of our national security strategy,” Ms. Crook said.
Rep. Brian Mast, chairman of the House Foreign Affairs Committee, said the new rules will constrain the growth of China’s military-industrial base and make sure China’s military does not threaten U.S. military personnel with technologies built using U.S. capital and know-how.
“This action is a major step toward stopping the offshoring of our crown-jewel technologies to our greatest foreign adversary,” the Florida Republican said.
“We are in a must-win, generation-defining battle that will shape the future of technology. I applaud President Trump’s audacious move to protect America’s technological advantage.”
In Beijing, Foreign Ministry spokeswoman Mao Ning called the proposed restrictions “discriminatory” and overstretching the idea of national security.
“The U.S. should abide by the principles of market economy, stop disrupting normal business cooperation, and help keep global industrial and supply chains stable through concrete actions,” she told reporters.
The proposed rule is now open for public comment until Dec. 7, and the final version could change.
On Beijing’s biological weapons development, China’s military is engaged in secret biological weapons work as a key element of an asymmetric warfare strategy, according to a 2024 report by the think tank CCP BioThreats Initiative.
An authoritative Chinese military textbook, “Science of Military Strategy,” includes a section identifying biology as a domain for military struggle. The book mentions the potential for new types of biological warfare to include “specific ethnic genetic attacks” designed to affect targeted ethnic groups.
The Chinese military is also developing biological arms disguised as civilian research in places like the Wuhan Institute of Virology, considered a main source of the COVID-19 virus outbreak, according to the State Department.
Chinese brain warfare research was disclosed in the Pentagon’s 2024 annual report on the Chinese military, which revealed that Beijing had launched a “China Brain Project” in 2016 aimed at unlocking human cognitive functions and neural pathways to support civilian and military applications.
The research includes brain-computer interface activities to enable humans and computers to interact and exchange information through brain implants or skull implants.
Chinese researchers have also conducted experiments with mind control of remote machines. The technology could give PLA commanders and troops optimized command-and-control networks and the ability to maximize the use of advanced weapons systems and other military equipment for more rapid and precise attacks.
Other work includes “emotion detection” for cognitive warfare to influence enemy troop morale in war and establish control over civilian populations.
“The PLA is exploring a range of ’neurocognitive warfare’ capabilities that exploit adversaries using neuroscience and psychology,” the Pentagon report said without elaborating.
The first public clues to Chinese brain warfare were disclosed in December 2021 when the Commerce Department Bureau of Industry and Security announced sanctions on the PLA’s Academy of Military Medical Sciences and 11 related Chinese research institutes.
The sanctions were imposed based on what the notice said was research on “purported brain-control weaponry” for the Chinese military.
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