In the News: Reverse CFIUS Final Rules; China Encourages Foreign Equity Investment; and Data Centers Attract US PE Investors

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Reverse CFIUS Rules Finalized, With One Key Change

The Biden Administration has finalized rules that would restrict U.S. outbound investment into China, following its initial draft in June, Reuters reports. The new rules, referred to as "reverse CFIUS," will take effect on January 2 of next year and will be overseen by the U.S. Treasury's Office of Global Transactions.

Under the reverse CFIUS mechanism, U.S. companies are banned from, or must notify the Treasury before engaging in, investments in mainland China, Hong Kong, and Macau that involve semiconductors, microelectronics, quantum information technologies or artificial intelligence.

The reverse CFIUS mechanism differs from CFIUS rules governing foreign investments into the U.S. in that it does not have a review mechanism, Charles Wu, counsel at Clyde & Co, told China Law & Practice. Instead, it contains blanket prohibitions on certain investments and requirements for companies to notify the Treasury Department, "absent which the investments are allowed." An article by Ropes & Gray adds that in lieu of a review regime, "in exceptional circumstances, parties to a covered transaction may apply to the Treasury Department to seek an exemption to the Outbound EO's requirements for a covered transaction that is in the national interest of the United States."