Treasury Moves to Widen Ban on Chinese AI Deals

WASHINGTON, Oct. 23 — TheThe Treasury Department proposed on Thursday to extend its ban on covered U.S. investments to Chinese developers of artificial intelligence, whatever the training compute behind their models. The 137-page draft would also bring AI-enabled robots and new kinds of chips under the ban, and add three industries and five countries to the program, which has run since January 2025. Listed shares, index funds and some other deals would stay excepted.

Filed for public inspection on Friday, the draft is to be published in the Federal Register on Monday. It carries out the Comprehensive Outbound Investment National Security Act, or COINS Act, which Congress enacted on Dec. 18, 2025, in the defense act for fiscal 2026. It applies to U.S. persons dealing with what it calls covered foreign persons.Who CountsA U.S. person is a U.S. citizen or permanent resident, an entity organized in the United States, including its foreign branches, or anyone in the United States. Covered foreign persons include entities incorporated, organized or with a principal place of business in a country of concern, and entities owned 50 percent or more by, or controlled by, such persons or governments. To “develop” covers any stage before serial production, such as design, substantive modification or the testing of prototypes.

The rules in force sort Chinese AI developers by “the quantity of computing power for training, designed end uses, and intended end uses,” the draft says.The Old LinesUnder the current rules, a covered deal is banned if the Chinese company’s AI system was trained with more than 10²⁵ computational operations (10²⁴ using mainly biological sequence data), or is designed exclusively for, or intended for, military, government-intelligence or mass-surveillance uses. If not already banned, a covered deal must be reported when the system exceeds 10²³ operations, is designed for such uses, or is intended for cybersecurity, digital forensics, penetration testing or robot control. It calls AI “super intelligence,” or SI, as an executive order of Sept. 29 directs. “Over the past two years, SI models have achieved notable performance gains through additional means other than the quantity of training compute. Therefore, no single measure, benchmark, or threshold is currently sufficient to distinguish advanced models,” it says.

So the draft puts “Development of any SI system” on its banned list and leaves no AI on the list of deals that need only notice. A blanket line, Treasury argues, spares investors from having to ascertain “the technical capabilities or thresholds of SI systems.”

Robots and Chips

The definition reaches “an SI agent harness and an embodied SI or physical SI system (e.g., SI-enabled: industrial robots, bipedal or humanoid robots, quadruped robots, other mobile robots, autonomous vehicles, and unmanned systems).” Read as written, the ban would reach covered U.S. investments in a Chinese maker of humanoid robots, autonomous vehicles or unmanned systems that develops its own AI or enhances another company’s. Developing “an agentic harness layer with a third-party SI model” counts, the draft says; using “an off-the-shelf third-party SI system strictly for internal, non-commercial purposes” does not, “solely on that basis.”

The banned list would also add “high-bandwidth memory with a memory bandwidth density greater than 2 gigabytes per second per square millimeter,” in line with export controls, Treasury says, and photonic integrated circuits, “including development of optical components, co-packaged optics, or silicon-photonics integration.” Neither is on the list in force. High-bandwidth, low-latency interconnects for high-performance computing would need notice.

The COINS Act adds two sectors to the three already covered, which are chips, AI and quantum technology: high-performance computing and supercomputing, where today’s ban on deals involving the largest supercomputers carries over, and hypersonic systems. Treasury added biotechnology. Beyond China, Hong Kong and Macau, the countries of concern would be Cuba, Iran, North Korea, Russia and Venezuela “under the regime of Nicolás Maduro Moros,” in the law’s words.VenezuelaThe list is the statute’s. The draft notes that “that regime no longer exists”: on March 5, 2026, it says, the United States recognized Delcy Rodríguez as Venezuela’s head of state.

Who Pays

From PitchBook data, Treasury counted almost 230 U.S.-based investors making about 300 investments in the six sectors in countries of concern from about 2023 through 2025. Doubling the averages in case the data undercount, it assumes about 150 investors making 200 potentially covered deals a year. Those shut out “may have to seek less promising investment opportunities,” the draft says.

Securities traded on an exchange or over the counter “in any jurisdiction,” and registered funds such as index funds, would be excepted. So would limited partners, as now, who commit no more than $2 million, aggregated across a fund’s investment and co-investment vehicles, or who obtain a binding assurance that their capital will not go to a barred or notifiable deal. None of these exceptions would hold if the investor gains governance rights beyond standard minority-shareholder protections. A new exception for deals of no more than $50,000 over 12 months would apply only to those that need notice: “A prohibited transaction below this threshold could raise national security concerns,” the draft says.

“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,” Scott Bessent, the Treasury secretary, said in a statement. The draft cites risks “from the ability to autonomously conduct cyberattacks to the potential use by malign actors and foreign adversaries to develop weapons of mass destruction.”

Asked about the plan to add biotechnology, Mao Ning, a spokesperson for China’s Foreign Ministry, said that “Overstretching the concept of national security, taking discriminatory measures against specific countries, and artificially restricting trade, economic and investment activities serve no one’s interests,” AP reported. “It’s just the first step in a fairly long process to get to changes which presumably will be more enforcement-minded,” Ryan Majerus, a former U.S. trade official now a partner at King & Spalding, said, as AP quoted him.

Comments are due Dec. 7, and Treasury says it “particularly welcomes feedback” on the implications of banning the development of any SI system, including “possible alternative approaches aimed at the same policy intent.” For funds, the question is whether a threshold returns in the final rule, which will set the date the new regime takes effect; until then the current rules apply. Capital called later under a binding commitment made before that date would be excepted from the new rules, though the draft warns that such a deal may still be covered by the current ones.