The U.S. Senate approved a $900 billion defense bill on Wednesday that includes measures to limit U.S. investments in China’s technology and defense sectors, passing it by a 77 to 20 vote.
The 2026 National Defense Authorization Act, which Congress must pass annually, cleared the House on December 10 by a similarly wide margin of 312 to 112. The bill incorporates the Comprehensive Outbound Investment National Security Act, a measure aimed at restricting U.S. investors from investing in China’s military and strategic sectors.
The investment screening measure significantly strengthens controls on U.S. investments in countries like China that are considered national security risks. Building on the Department of the Treasury’s January rule implementing a previous executive order, the legislation would establish a formal process: U.S. investors must notify government regulators about deals involving sectors vital to China’s military, intelligence or surveillance operations.
The bill also gives Treasury the authority to broaden restrictions, extending them beyond semiconductors and quantum computing to include areas such as artificial intelligence and advanced manufacturing.
The legislation covers a wide range of financial activities, including equity and debt investments; passive and index funds; joint ventures; and both private equity and venture capital funds.
The measure limiting foreign investment underscores the U.S. drive to separate critical parts of the U.S. economy from China’s industrial growth. However, the presence of exceptions highlights the ongoing complexity and interdependence between the two countries.
For example, the U.S. recently granted Nvidia Corp. permission to resume limited sales of its H200 AI chips to China, on condition that 25% of the China-derived revenue must be remitted to the U.S. government.
The bill also authorizes a 3.8% pay raise for U.S. troops, $400 million in annual security aid for Ukraine, and investments in defense technology.
President Donald Trump is expected to sign the bill into law.