US Tightens Controls on Tech Investment in Chinese Companies, Supply Chain Security
Udumbara
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President Donald Trump on Dec. 18 signed into law a tighter outbound investment screening regime to stop U.S. capital from funding Chinese high-tech companies.
The $901 billion defense bill also includes a raft of new powers to strengthen supply chain security and improve the government’s China expertise.
Outbound Investments
The COINS Act codified and expanded the Treasury’s new rules on outbound investment to restrict outbound investments in advanced semiconductors, AI systems, quantum computing, supercomputing, and hypersonic systems in countries of concern, including China, Iran, North Korea, Russia, and Venezuela.The act also gives the U.S. president power to sanction foreign persons in these sectors who are linked or controlled by these regimes, to prohibit investment transactions with them, and to introduce penalty for violations of the law.
Security and Supply Chains
The NDAA includes a revised version of the Biosecure Act, which requires the Director of the Office of Management and Budget to publish a list of “biotechnology companies of concern,” and bans federal agencies from procuring biotechnology equipment or services from these companies.A separate part of the NDAA requires the Director of National Intelligence to ensure that the intelligence community does not use a Chinese biotechnology supplier or its foreign subsidiaries to make products using synthetic DNA or RNA from domestic sources if the company is deemed to be a security or supply chain threat to the United States.
The law also required the Defense Department to create a Biotechnology Management Office.
The NDAA added molybdenum, gallium, and germanium to the list of sensitive materials. With some exceptions, the Department of Defense is prohibited from buying these materials from China, Iran, North Korea, or Russia, or selling the materials from the National Defense Stockpile to these countries.
It modified provisions in the 2021 NDAA that require the defense secretary to publish an annual list of Chinese military companies. The amendment specified that such companies may operate in or outside of China to prevent circumvention. While updating the list, the secretary will also be required to consider companies that have been sanctioned that year by other U.S. government departments.
The defense secretary is required to phase out Chinese computers and printers and to eliminate the reliance on optical glass and computer displays from countries including Belarus, China, Iran, North Korea, and Russia by Jan. 1, 2030.
The Pentagon is banned from buying solar panels from China, Iran, North Korea, and Russia.
The department will also have to avoid sourcing seafood from these countries.
China Expertise, Taiwan, and Others
The NDAA authorized the State Department to expand its Regional China Officer (RCO) program to create at least 20 RCOs to monitor and report on the Chinese regime’s activities where the RCOs are posted, and to share their knowledge with their host countries and other U.S. allies.The State Department is also authorized to create ambassadors-at-large for the Arctic and the Indian Ocean region and units to counter Chinese and Russian influence, as well as to establish an Inner Mongolia section within the U.S. Mission in China to monitor issues including human rights, developments in critical minerals mining, environmental degradation, and China’s space capabilities.
The NDAA mandated the declassification of intelligence related to the origins of COVID-19, including research conducted at the Wuhan Institute of Virology and the intention of Gain of Function research.
It also includes provisions related to Taiwan, such as joint maritime training programs.
