Treasury Moves to Fold Biotech Into China Investment Restrictions

The U.S. Treasury Department proposed on October 22 to add biotechnology to the list of sectors where American money cannot freely flow into China, opening a 45-day public comment period that closes December 7.

The draft rule would prohibit U.S. companies and investors from entering equity deals, convertible debt arrangements, joint ventures, greenfield investments or limited-partner commitments involving Chinese biotech companies — and the manufacturers that supply them with lab and production equipment. Bloomberg first reported the proposal. Treasury published it under the Comprehensive Outbound Investment National Security Act, the statute that already screens American capital flowing into Chinese semiconductors, artificial intelligence, quantum computing and high-performance computing.

The mechanism is old. Biotech is what's new.

What does the proposal actually change?

The AI and chip provisions trace back to an executive order Joe Biden signed in August 2023. Treasury turned that order into a final rule that took effect January 2, 2025 — a rule that already carries a $50,000 de minimis threshold designed to catch third-country vehicles, so a fund domiciled in Singapore or the Cayman Islands can't dodge the regime just because it isn't itself Chinese-controlled.

Congress then wrote the whole regime into statute on December 18, 2025, as part of the fiscal year 2026 National Defense Authorization Act. It renamed the law the COINS Act and handed Treasury Secretary Scott Bessent the power to add new sectors by designation. Biotech is the first sector he has used that power on.

Biotechnology was conspicuously left out of the original COINS Act text, and for months that omission was a live fight in Washington. Representative John Moolenaar, who chairs the House's select committee on China, and Representative Debbie Dingell sent Bessent a letter in May pushing to designate biotech a prohibited sector outright.

Pfizer and other large drugmakers took the opposite position. They met with administration officials to argue that broad restrictions would cut off access to Chinese-originated drug candidates at a moment when licensing deals with Chinese biotechs have become central to refilling American pipelines.

Treasury's proposal splits the difference. According to Fierce Biotech, it restricts the capital relationships — financial stakes, joint ventures, the deals that hand over governance rights or ownership — while explicitly carving out straight licensing agreements. A pharma company can still pay a Chinese biotech for the rights to a molecule. It just can't take an equity position in the company that developed it.

The takeaway: Treasury is blocking ownership, not commerce.

Why the licensing carve-out matters

The line matters because of how dependent the industry has become on China as a source of early-stage science. Chinese biotechs have become such a fixture in big pharma's licensing pipeline that groups like the American Economic Liberties Project have argued — in an op-ed Stat ran in May — that U.S. drugmakers are trading long-term domestic biotech strength for short-term pipeline fixes.

Treasury's proposal doesn't touch that trade. It touches the ownership stakes, the joint research ventures and the limited-partner checks that would otherwise let American capital help build out Chinese biotech manufacturing and R&D infrastructure directly.

The broader context is strained. Bessent announced an extension of the U.S.-China trade truce on September 23 as Xi Jinping visited Washington, but China remains short on $17 billion in promised farm purchases, and rare earth shipments haven't returned to agreed levels.

What should seed-stage investors watch?

Here's the part that should worry seed-stage investors more than headline M&A numbers: the $50,000 threshold was never a floor built for Series C rounds. It exists to catch small, indirect exposure — the angel check routed through a fund-of-funds, the chip design IP license, the cloud compute arrangement with a Chinese AI lab. These are structures investors assumed were too small or too indirect to trip a federal filing requirement.

The AI and semiconductor sectors have lived under this threshold since January 2025. Any fund or LP with China-adjacent AI exposure already needed to have mapped its cap table against this regime well before this week's news. Treasury has signalled it intends to keep expanding the list — biotech is simply the sector that happened to go first.

Which countries are covered?

The COINS Act also widened the map. The original 2023 executive order named only China, Hong Kong and Macau as countries of concern. Congress added five more in December: Russia, Iran, North Korea, Cuba and Venezuela.

The enforcement infrastructure and designated technology sectors for those additions still have to be built out through further rulemaking, due by March 2027 under the statute's own timeline.

Two people familiar with the matter told Fierce Biotech that Treasury resisted fully folding pharmaceuticals in while it finished the AI and semiconductor rules, and the licensing carve-out in this draft reflects that caution rather than a clean win for either side. Moolenaar and Dingell's separate Biotech Investment National Security Act, introduced in June, would go considerably further, reaching into biologics manufacturing and clinical R&D directly. That bill hasn't moved.

For now, the fight over how far outbound investment law should reach into biotech is happening in a 45-day comment window, not on the House floor — and Pfizer's lobbyists know it.

By Grace Kim