Treasury Releases Proposed Rules on Outbound Investment in China
On June 21, the Treasury Department released proposed rules that would impose controls on outbound investments in China. The proposed rules follow Treasury’s August 2023 advanced notice of proposed rulemaking on outbound investments in China. The proposed rules implement the Biden administration’s Executive Order 14105, which detailed a high-level framework to mitigate the risks to U.S. national security interests stemming from U.S. outbound investments in “countries of concern” which currently only includes China. According to a Davis Polk client alert, the proposed rules remained mostly consistent with the proposals put forth in the advance notice, by prohibiting or imposing notification requirements on investments by U.S. persons and entities in companies based in China or owned by Chinese interests. This includes targeted business activities in three separate areas
- semiconductors and microelectronics,
- quantum information technologies, and
- certain applications of artificial intelligence (AI).
The proposed rule covers not only equity investments, but also certain debt transactions, joint ventures, investment funds and other indirect investments. Treasury requests interested stakeholders comment by August 4.
Click here to read a client alert covering the proposed rules from Davis Polk.