Source: Sidley Austin LLP, October 28th, 20261
Day counts are worked out from today's date when the page opens.
The US Treasury Department proposed on October 22nd, 2026 to widen the limits on American money going into Chinese technology companies. Treasury runs the Outbound Investment Security Program, the rules that bar or require notice of certain US investments in companies in China and other named countries. The draft implements the COINS Act, a law Congress passed in December 2025. Scott Bessent, the Treasury Secretary, and Christopher Pilkerton, the assistant secretary for investment security, are behind it. Written comments are due by December 7th, 20262,3.
The one enforcement action so far points at small stakes held through foreign funds, not at large chip deals. Treasury imposed a $200,000 penalty on Amidi, LLC, the parent of the venture platform Plug and Play Tech Center, for failing to notify Treasury of an investment of about $92,478 by its Chinese fund in Noematrix, a Chinese company that develops artificial intelligence and robotics4.
Linking the draft to the sanctions the Office of Foreign Assets Control (OFAC) announced on October 19th, 2026 goes further than the record does. OFAC listed investment entities linked to Miracle Plus under a different law, the Protecting American Intellectual Property Act (PAIPA), and no source links that action to the outbound program5,6. The draft is still a proposal, and Treasury has asked for comment on its scope2.
The program started with an executive order in 2023 and now rests on a statute.
On August 9th, 2023 the President issued an executive order that told Treasury to build a program barring or requiring notice of certain US investments in companies tied to countries of concern. It named China, including Hong Kong and Macau, and three technology areas: chips, quantum computing and artificial intelligence3. On December 18th, 2025 Congress wrote the program into law as part of the COINS Act, the Comprehensive Outbound Investment National Security Act3.
On October 22nd, 2026 Treasury issued a notice of proposed rulemaking, a draft regulation open to public comment, to carry out the act2. The act names five technology sectors: semiconductors and microelectronics, artificial intelligence systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. Treasury used its power under the act to add biotechnology2. The draft also adds Cuba, Iran, North Korea and Russia to the countries covered7,1.
The Associated Press reported that the rule would apply only to investments above $50,000 and would exclude many financial investments, including stock purchases8. The Federal Register, the government's official journal, was due to publish the draft on October 26th, 20267. Sidley Austin, a law firm, expects the final rule to take effect at the end of the first quarter of 2027, though it notes the draft could change1.
Treasury's enforcement page lists one action. In 2026 it imposed a $200,000 penalty on Amidi, LLC for failing to submit a required notification of an investment by its controlled foreign entity into a Chinese embodied artificial intelligence company. In April 2025 Amidi's subsidiary, a Chinese fund, invested approximately $92,478 in Shanghai Qiongche Intelligent Technology Company Limited, known as Noematrix, without notifying Treasury4. Amidi is the parent of the organization that does business as Plug and Play Tech Center4.
The penalty was more than twice the size of the stake. The case turned on the parent's duty for what its foreign subsidiary did, and on a notice that was never filed4.
US dollars
Source: US Department of the Treasury4
Under the existing rules a company counts as a person of a country of concern when such persons hold at least 50% of its voting interest, voting power or equity. Below that level, a control test applied only when a Chinese government entity could direct the company1. The draft would treat any person or entity under the direct or indirect direction or control of a person from a country of concern as a covered foreign person, whether government or private. Sidley says a minority Chinese-owned company may still be covered if a Chinese investor can direct its management1.
The draft also reaches affiliates and subsidiaries of firms on restricted-party lists, and adds two lists: the Defense Department's list of Chinese military companies and the forthcoming list of biotechnology companies of concern under the BIOSECURE Act1. The Amidi case shows the other half: a US parent answers for a notice its controlled foreign fund should have filed4.
US TreasurySaid the proposed regulations would strengthen the program to prevent adversaries from using US investment to develop critical technologies, and would give investors clarity2.
US TreasurySaid the rules address risks that arise when foreign adversaries try to benefit from US investment in key technology sectors2.
Portraits after photographs. Christopher Pilkerton: photo published by home.treasury.gov.
The draft prohibits US persons from investing in companies from the covered countries that engage in certain biotechnology activities. Sidley says the broadest part covers using a biological system to produce a pharmaceutical compound, including small molecules, vaccines, cell and gene therapies and monoclonal antibodies1. It also bars joint ventures for those activities, which could curb the common NewCo structure, in which a Chinese company licenses intellectual property to a US company in exchange for equity1.
Cash licensing is a different matter. Pure licensing with cash royalties is not covered, but contractual collaborations that share contributions and profits and losses could be treated as joint ventures1. The Financial Times quotes Capstone vice-president Will Humphrey, at a healthcare policy consultancy, as saying that licensing deals paid in cash without an equity investment avoid the rules10.
The Biotechnology Innovation Organization, the biotech industry's main lobbying group in Washington, raised concerns, the Financial Times reported on October 22nd, 202610. The group said:
We need to ensure that we do not have an overly broad approach that would create uncertainty for innovators and investors, and that may unintentionally risk weakening US biotech competitiveness
Financial Times10
First, the sanctions link. OFAC's October 19th action listed Beijing Qiji Chuangtan and Miracle Plus-linked investment entities on its list of non-SDN, menu-based sanctions under PAIPA, with limits on US bank loans, foreign-exchange transactions, transfers and investments5. PAIPA is a separate law, and no source cited here says the outbound program prompted it. A fund manager can treat it as a warning about China-linked venture capital without treating it as part of this rule.
Second, scope. Duane Wright, a senior healthcare policy analyst at Bloomberg Intelligence, said licensing deals are not expressly prohibited and that the broad biotechnology definition leaves room to narrow after comments, according to Bloomberg via the Taipei Times11. Sidley notes that the exceptions in the existing program, including publicly traded securities where the investor gets no rights beyond standard minority protections, would continue1.
Third, an earlier forecast. In January 2026 law firm Skadden said it did not expect Treasury to deviate significantly from the existing regulations12. The draft added a sector and a wider control test, so that expectation did not hold.
Ryan Majerus, a former US trade official and now a partner at King & Spalding, a law firm, told the Associated Press on October 22nd, 2026:
It's just the first step in a fairly long process to get to changes which presumably will be more enforcement-minded, to put more teeth behind the outbound investment program
PBS NewsHour (Associated Press)8
Confidence is medium. The mechanism is documented: Treasury's own enforcement page shows it penalizes a missing notice for a small stake held through a foreign subsidiary4. The horizon is less clear, because the draft is open for comment and Sidley expects the final rule to take effect around the end of the first quarter of 20271.
The one case is a single data point. We make no claim about how many more Treasury will bring.
| Reader | First question |
|---|---|
| Private equity and venture firms | Do any Chinese-registered funds or vehicles hold stakes in covered sectors, and who files the notice? |
| Biotech and pharma companies | Does any China deal give a US party equity or shared profits and losses, or only cash licensing fees? |
| Family offices | Which limited partner commitments sit in funds that invest in China? |
| Law firms | What does the draft's knowledge standard and the duty of diligent inquiry mean for each deal file? |
Confidence on the mechanism is high, because Treasury has documented the penalty and its reasoning. Confidence on the horizon is low, because Treasury has not said when it will publish a final rule2. These probabilities are the analyst's own judgement.
Analyst assessment. Each call is scored once its date passes.
Treasury lists a second enforcement action on its outbound investment enforcement page.
Treasury publishes final regulations implementing the COINS Act.