Policy Backgrounders

Executive Order on Outward Investment Targets China

August 10, 2023

On August 9, the President signed an Executive Order “Addressing United States Investments In Certain National Security Technologies And Products In Countries Of Concern,” which authorizes the Treasury Department to prohibit or require notification of certain investments from the US to China, Hong Kong, and Macau. However, implementation of the regulations will not take place immediately.

• The Executive Order targets three categories of “sensitive technologies critical to national security”: semiconductors and microelectronics, quantum information technologies, and “certain artificial intelligence systems.”  It is targeted to technologies with specific potential military uses.
• Future regulations will include a category of prohibited transactions and a separate category of transactions which will require notice to the Treasury. But the US Government will not make the decision as to whether a particular transaction is prohibited or requires notice, leaving that decision to the US investors, subject to review by Treasury should Treasury believe the investors have not followed the regulations.
• Treasury also issued an Advanced Notice of Proposed Rulemaking detailing the scope of the regulations; comments on the proposed regulations will be due 45 days from the date of publication in the Federal Register. The program will go into effect only once the actual regulations are final—a process that could easily take a year or more.