China Opposes Expanded U.S. Investment Restrictions, Signals Right to Retaliate

Key Facts

China’s Ministry of Commerce said on October 24 that it strongly opposed a U.S. proposal updating the outbound investment security program related to China, and said Beijing would monitor developments and reserve the right to take countermeasures. The objection came after the U.S. Treasury Department issued a notice on October 22 proposing new rules to implement the COINS Act. China’s ministry said the proposal expands the scope of restrictions on investment in China in a discriminatory manner and increases their severity. It also said the proposal conflicts with important understandings between the two countries’ leaders and disrupts normal commercial cooperation between their companies. Beijing did not specify any countermeasures, while the U.S. rules remain at the proposal stage.

The proposed update is based on statutory authority covering five technology sectors: semiconductors and microelectronics, artificial intelligence, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. The Treasury Department added biotechnology to the proposed rules, broadening the range of technologies that could be subject to outbound investment review. This does not mean a general ban on all investment in those sectors; the proposal distinguishes between certain transactions that U.S. persons must notify the department about and other specified transactions they are prohibited from entering. The restrictions’ application is linked to the nature of the technology and the covered foreign persons. The proposed program therefore combines disclosure and prohibition, depending on the type of transaction.

The Treasury Department justified the update on national security grounds. Treasury Secretary Scott Bessent said the rules are intended to prevent adversaries from using U.S. investment to develop foundational technologies that threaten U.S. national security. Treasury official Chris Pilkerton said the program aims to ensure the government can monitor investments that could pose security risks and prevent them when necessary. The Associated Press reported that the proposed rule would apply to investments exceeding $50,000, with many financial investments, including stock purchases, exempted. The agency quoted a legal expert as saying the rule would require companies to adopt more comprehensive risk management compliance programs. These details reflect the broader screening and reporting requirements that could face affected U.S. companies.

The proposal is part of a program that began in 2023 with an executive order imposing restrictions on U.S. outbound investments in sectors including semiconductors, quantum computing and artificial intelligence, according to the Associated Press. Congress then passed a law in December 2025 codifying the program and expanding its scope to include additional technologies and countries. The new update covers investments in biotechnology, supercomputing, artificial intelligence and hypersonic systems, which the agency described as capable of reaching five times the speed of sound. The agency said the Treasury Department imposed a $200,000 fine in July on a U.S. company for failing to report an affiliated investment of $92,500 in a Chinese artificial intelligence and robotics company. The case provides an example of enforcement of existing reporting requirements before the new rules are issued.

The proposal still faces an incomplete regulatory process: the Treasury Department will accept comments through December 7, 2026, then review stakeholder input before issuing final regulations that will set the effective date. A former U.S. trade official told the Associated Press that the proposal was “a first step in a long process” toward changes that could focus more heavily on enforcement. Reuters placed the development in the context of a state visit during which President Donald Trump hosted Chinese President Xi Jinping in Washington the previous month, alongside a less restrictive U.S. approach to Chinese technology in Trump’s second term. The agency said publication of the proposal could signal a desire to maintain pressure on Beijing’s technological ambitions. This came as the two countries extended their trade truce the previous month through January, according to the Associated Press.