Outbound Investment Rules Explained: Treasury's Limits on US Money Into Chinese AI and Chips
For years US export controls stopped American chips and tools from reaching Chinese military-linked users, while American venture capital could still fund the Chinese startups building rival chips and AI models. The outbound investment rules close that gap. Since January 2, 2025, US persons have been barred from some investments in Chinese semiconductor, quantum and AI companies, and must report others to the Treasury Department.
This is a different tool from export controls. Export controls govern goods, software and technology. The outbound regime governs money and the “intangible benefits” that come with it, such as board seats, management advice and network access.
How it started
| Date | Step |
|---|---|
| Aug 9, 2023 | Executive Order 14105 tells Treasury to build an outbound investment program |
| Aug 2023 to mid-2024 | Proposed rules and comment periods |
| Oct 28, 2024 | Final rule published (31 CFR Part 850) |
| Jan 2, 2025 | Rule takes effect; Treasury’s Office of Global Transactions administers it |
| Feb 21, 2025 | “America First Investment Policy” memo signals a wider program |
| Dec 2025 | COINS Act passed as part of the FY2026 defense authorization law and signed |
Who is covered
The rules apply to US persons wherever they are: US citizens, green card holders, US companies and their foreign branches, and anyone physically in the United States. US persons also must not “knowingly direct” a transaction by a non-US person that would be banned if they did it themselves, and US companies must take reasonable steps to stop their foreign subsidiaries from doing such deals.
The target is a covered foreign person: an entity from a “country of concern” (as first written, China including Hong Kong and Macau) that is engaged in one of the covered technology activities. That includes companies based elsewhere that are majority-owned from China or that earn most of their revenue there in covered activities.
What counts as a covered transaction
The rules reach deals that buy influence or ownership:
- Buying equity or convertible debt in a covered foreign person
- Creating a joint venture with one
- Greenfield or brownfield investment that results in a covered business
- Investing as a limited partner in a non-US fund that will invest in covered companies (above certain thresholds)
Prohibited vs notifiable
Each sector has two tiers. The top tier is banned. The lower tier is allowed but must be reported to Treasury within 30 days after the deal closes.
| Sector | Prohibited | Notifiable |
|---|---|---|
| Semiconductors | Advanced chip design software (EDA), chipmaking equipment, design and fabrication of advanced chips, advanced packaging, supercomputers | Design, fabrication or packaging of older, less advanced chips |
| Quantum | Quantum computers and key components, certain quantum sensors and networking for military or surveillance use | None; all covered quantum activity is prohibited |
| AI | AI systems for military, intelligence or mass surveillance use; models trained with more than 10^25 operations | AI systems trained with more than 10^23 operations, or built for certain sensitive uses |
The compute thresholds use the same idea as AI safety laws elsewhere, counting the raw computation spent on training. Our comparison of AI compute thresholds shows how these numbers line up with the EU and US states.
The chip definitions follow export control thresholds: logic at 16/14nm and below, DRAM at 18nm half-pitch and below, and NAND with 128 or more layers count as advanced. If those numbers are unfamiliar, start with chip node names decoded.
What is exempt
Several common investments are excepted:
- Publicly traded securities, including shares bought on an exchange and most index funds and ETFs
- Limited partner stakes in funds below a small size threshold, or with contractual assurance the money will not go to covered companies
- Buying out a Chinese owner’s entire stake in a company
- Intracompany transfers within an existing US-parented group
- Certain deals involving countries that have their own similar programs
The listed-securities carve-out is the big one. Retail and institutional investors can still buy shares in Chinese chipmakers listed in Hong Kong or Shanghai through normal channels. The target is private capital: venture, growth equity and private equity, where the investor often gets a board seat and helps the company grow.
Enforcement and the knowledge standard
Violations fall under the International Emergency Economic Powers Act (IEEPA), so civil penalties can reach the statutory maximum per violation (adjusted for inflation, a few hundred thousand dollars) or twice the transaction value, whichever is larger. Treasury can also order a deal unwound.
The rules use a knowledge standard. A US person violates them if they knew, or should have known after reasonable diligence, that the target was a covered foreign person. In practice this has pushed funds to add China technology questionnaires, ownership checks and representations to deal documents. Treasury publishes a non-exhaustive list of known covered foreign persons, but missing from the list is not a safe harbor.
The COINS Act: from executive order to law
The original program rested on an executive order, which a future president could undo. In December 2025 Congress wrote it into statute through the Comprehensive Outbound Investment National Security (COINS) Act, carried in the FY2026 defense authorization law.
The law makes the program permanent, lets it cover countries beyond China, and adds hypersonics and high-performance computing to the covered technologies, with Treasury left to write the implementing rules. Until those rules are final, the January 2025 regulations remain the working rulebook. That direction matches the February 2025 investment policy memo, which had already floated adding sectors such as aerospace, biotech and hypersonics.
How it fits with everything else
Outbound rules are one piece of a larger set:
- Export controls stop tools and chips going out. See the US chip export controls timeline.
- The Entity List names specific companies. See the Entity List additions tracker.
- Sanctions block dealings with named people and firms outright. See sanctions regimes compared.
- CFIUS reviews money coming into the US, the mirror image of the outbound program.
The effect so far is mostly quiet. US venture investment in Chinese AI and chip startups was already falling sharply before the rules took effect, and the rules locked that in. Chinese tech financing now leans on state guidance funds, domestic venture capital and Middle Eastern sovereign money.
The thing to watch is the Treasury rulemaking under the COINS Act. Which extra countries and sectors it names, and how it treats publicly traded securities, will decide whether this stays a narrow venture capital rule or becomes something closer to a general investment wall. For the full chronology of US-China tech measures, the anchor page is the complete timeline of US-China technology decoupling.