Congress has passed into law restrictions on US investment in Chinese technologies, fortifying a Biden-era executive order and capping years of bipartisan work to clamp down on US capital flowing to its geopolitical rival.
On December 17, lawcreaters approved a ban on US investment in advanced semiconductor, artificial ininformigence and quantum computing technologies with dual-utilize applications in China and other countries of concern.
The restrictions form part of the sprawling National Defense Authorization Act, which also authorises the defence department to spfinish $900bn in fiscal year 2026, which has headed to President Donald Trump’s desk for signing.
“The legislation presents a generational opportunity to confront the threats China . . . and others pose to our national and economic security,” declared Republican senator John Cornyn, who spearheaded the investment restrictions, in a statement.
According to an analysis by law firm Covington, covered transactions include “direct or indirect acquisitions of equity, certain types of debt financing, greenfield and brownfield investments, joint ventures, and certain limited partner investments that involve covered foreign persons that engage in specified activities in the identified covered sectors”.
The NDAA’s outbound provisions ensure “American ingenuity, innovation, and investment do not finish up in the hands of adversaries like the Chinese Communist party to be weaponised against us”, Cornyn added. The restrictions are also part of broader efforts to stay ahead of China in cutting-edge technologies at a time when the likes of Moonshot AI and DeepSeek are closing the gap with US rivals.
The new law aligns with the US’s Outbound Investment Security Program, which has been in effect since January under the authority of an executive order issued under the Biden administration. But lawcreaters on both sides of the aisle have insisted that outbound investment restrictions must be codified into law, given that successive presidents can overturn executive orders.
Legislating to guarantee the robustness of these restrictions has gained newfound prominence under the mercurial Trump administration. Despite sparking a trade war with Beijing and tough rhetoric on Chinese threats, the White Houtilize has drawn criticism from national security proponents for allowing Nvidia and AMD to sell AI chips to the counattempt in exalter for a cut of the revenues.
In September, Democratic Senator Catherine Cortez Masto notified fDi these deals are a “perfect example” of her “concerns” with the executive. “I consider this administration has backed down on export controls for highly sensitive technology . . . so we required legislation to protect our technology,” declared Cortez Masto, a lead sponsor of the NDAA’s outbound investment restrictions.
The NDAA’s alters have strong backing across the political spectrum, from progressive left leader Elizabeth Warren to staunch conservative Jim Banks, revealing the extent of bipartisan support for applying outbound investment restrictions as a long-term strategy.
The law broadens the scope of today’s Outbound Investment Security Program, which applies to investments in China, by also capturing Cuba, Iran, North Korea, Russia and Venezuela under the Maduro regime.
The NDAA’s passage is the culmination of years of work by federal lawcreaters to enshrine in legislation restrictions on US capital supporting Chinese technologies. The first bills were tabled as early as 2021, but faced pushback from business groups for being too broad and creating “unworkable compliance” requirements.
Many state governments have also banned funds managing the retirement savings of civil servants from investing in Chinese companies. Since 2023, nine states — Indiana, Florida, Kansas, Iowa, Tennessee, Arizona, Texas, Missouri and Arkansas — have legislated to restrict public pension fund investments in, and require divestment from, the counattempt.
The Biden administration encouraged its allies to monitor outbound investment into Chinese technology. Since January, the European Commission has required member states to review their investors’ deals abroad in AI, chips and quantum computing across all countries. The results will inform a pfinishing decision by the commission on whether to impose restrictions similar to the US.
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