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Treasury proposes adding biotech to US curbs on investment in China, but leaves listed shares and ETFs outside the rules
The first draft rule under the COINS Act widens the outbound investment ban to brain-computer interfaces, biomanufacturing, hypersonics and more advanced chips, with comments due December 7.
HedgeWeekly News Desk ·
The US Treasury on Thursday, October 22, published a proposed rule to carry out the Comprehensive Outbound Investment National Security (COINS) Act, the law passed in December 2025 as part of the fiscal 2026 defence authorisation bill. Using powers the act gives the Treasury Secretary to add sectors, the department put biotechnology on the restricted list for the first time. The proposed prohibitions reach certain bio-derived compounds and materials, brain-computer interfaces, biomanufacturing equipment and facilities, bioinformatics tools, and hardware or software for automated scientific discovery.
The draft also tightens the existing technology categories. Banned semiconductor investments would extend to high-bandwidth memory, photonic chips and radiation-hardened chips; any investment in a country-of-concern company developing what Treasury now calls superintelligence systems would be prohibited outright, replacing a notification requirement; and hypersonic systems join the regime, with some related sensors and software notifiable rather than banned. The countries covered are China, including Hong Kong and Macau, plus Cuba, Iran, North Korea and Russia.
Several carve-outs remain. Publicly traded securities, index funds, mutual funds, ETFs and derivatives of those instruments are excepted, as are limited-partner commitments of up to $2 million. Notifiable deals must be reported within 30 days of closing, and Treasury will not publish a list of covered foreign companies, leaving each US investor to judge whether a transaction falls inside the rules. STAT, citing research firm Veda, reported that the plan would bar US companies from financial dealings with Chinese biotech firms and makers of biotech tools while still letting drugmakers license medicines developed in China. Massachusetts industry group MassBio, which has more than 1,700 members, said it would file comments urging narrowly targeted measures.
Why it matters: the rule restricts capital flows rather than trading, so hedge funds holding listed Chinese chip or biotech shares are largely outside its scope, while venture, private equity and fund-of-funds investors with larger LP commitments face the compliance burden, backed by penalties up to the maximum under emergency economic powers law and possible forced divestment. The biotech addition lands after strong gains in the sector: Investing.com data show WuXi AppTec up 22.8% and WuXi Biologics up 30.3% over three months, against a 23.1% drop in chipmaker Cambricon. Comments are due December 7, 2026, and the effective date will be set only in a final rule, leaving room for the scope, particularly on biotech joint ventures and NewCo structures, to change.
Sources
- BioPharm International: Treasury proposes adding biotech to outbound investment restrictions under COINS Act
- Unite.AI: Treasury proposes rules to expand outbound tech investment curbs
- STAT: Treasury proposes major restrictions to U.S. investment in Chinese biotech sector
- Investing.com: U.S. plans curbs on Chinese tech investment, these sectors are vulnerable