US funds weighing Chinese AI, chip or biotech deals face a proposed Treasury ban, while Beijing's July 1 outbound investment regulation already provides for countermeasures against discriminatory foreign measures.
China’s Ministry of Commerce (MOFCOM) said on October 24 that a US Treasury plan to widen limits on American investment in Chinese technology "discriminatorily" expands China-related restrictions, and that Beijing reserves the right to take unspecified measures in response. The ministry’s spokesperson made the remarks in a written question-and-answer published on the MOFCOM website, according to copies carried by China News Service and the 21st Century Business Herald. Reuters reported that the ministry urged Washington to stop expanding the curbs.
The response came two days after Treasury released its draft rules for the Outbound Investment Security Program, the regime that limits US money flowing into Chinese chips, AI and quantum companies. The draft would ban covered US investment in any Chinese developer of an AI system, add biotechnology as a new prohibited sector, and add hypersonic systems, according to an October 23 alert from law firm Ropes & Gray. Comments are due December 7, 2026.
MOFCOM did not say what measures it might take, or when. Its language closely tracks earlier replies to US investment rules, and the ministry has not announced any investigation or listing tied to the proposal. For investors, the statement sets out the political cost Beijing attaches to the rule while Treasury is still collecting comments.
MOFCOM says the draft breaks a consensus between the two leaders
The spokesperson said the proposed rule widens the scope of investment restrictions on China and tightens them, calling it "a typical case of overstretching the concept of national security," in the English rendering published by the Global Times. The ministry said the draft goes against the important consensus reached by the two heads of state, disrupts normal business between Chinese and US companies and damages the international trade order.
"China will closely monitor subsequent developments and reserves the right to take corresponding measures," the spokesperson said, according to the Global Times. The ministry added that limiting investment in China would also hurt US companies’ own interests, and urged Washington to respect market principles and stop politicizing and weaponizing economic and trade issues. Pointing to the size of China’s market and its consumption and investment potential, the spokesperson said "investing in China is investing in the future."
The reference to the leaders matters because, as Reuters noted, the presidents of China and the US have met twice in the past six months. Treasury says the measures also cover other countries and are meant to stop US capital from helping foreign adversaries develop "dual-use strategic technologies" with national security risks for the US, Reuters reported. China’s Foreign Ministry had already criticized the biotech part of the plan. Spokesperson Mao Ning said "overstretching the concept of national security, taking discriminatory measures against specific countries" serves no one’s interests, the Associated Press reported.
The draft turns most AI deals from a filing duty into a ban
The current program requires US investors to notify Treasury of some AI deals and bars others. Ropes & Gray says the draft replaces the term "AI systems" with "super intelligence (SI) systems" and would prohibit investment tied to any such system developed by a covered foreign person, removing the existing AI notification category. Its definition reaches generative systems, agent software and embodied systems such as robots and autonomous vehicles.
In chips, the draft keeps existing bans and adds high-bandwidth memory, radiation-hardened integrated circuits and photonic integrated circuits. The supercomputer ban extends to components that enable that capability, and high-bandwidth, low-latency interconnects become notifiable. Quantum bans widen to cover quantum computing algorithms and applications. Biotech would be a prohibited category with no notification tier, covering areas such as brain-computer interfaces, biomanufacturing equipment, sequencing and bioinformatics tools. Ropes & Gray notes that Treasury describes the biotech expansion as discretionary rather than required by the COINS Act, the law behind the draft, and is seeking comment on its scope.
Treasury has also started enforcing the current rules. In July it imposed its first penalty, US$200,000, on Amidi LLC over an investment of about US$92,478 in Noematrix, a Shanghai AI and robotics company, and announced the case on October 7, according to law firm Debevoise & Plimpton. EastFrontier covered how Treasury turned the small Noematrix deal into a compliance signal.
Beijing’s new outbound investment regulation gives it a legal route to respond
Beijing’s own Regulation on Outbound Investment, in force since July 1, 2026, gives it a legal basis for countermeasures against foreign measures it calls discriminatory. According to a June summary by law firm Mayer Brown, Article 24 lets agencies place organizations and individuals behind discriminatory foreign measures on a countermeasures list under the Anti-Foreign Sanctions Law. Article 25 allows import and export restrictions and investment bans on foreign parties that discriminate against Chinese investors. Article 23 allows investigations of trade-related investment barriers abroad. Caixin reported in June that the State Council rules let the Commerce Ministry investigate such barriers and counter foreign sanctions.
MOFCOM’s statement did not cite the regulation, and no step under it has been reported. The next formal marker is Treasury’s December 7 comment deadline, after which a final rule will set the effective date. A MOFCOM investigation notice or a countermeasures list entry naming US entities would show Beijing moving from statements to action.