New FIGHT China Act Bans U.S. Investment in Sensitive Tech, Mandates Divestment from Listed Companies Within 365 Days

The newly proposed Foreign Investment Guardrails to Help Thwart (FIGHT) China Act is a massive regulatory effort aimed at cutting off U.S. money and technology from flowing into China, Hong Kong, and Macau (collectively the “country of concern”). The core message is simple: if you’re a U.S. person or company, the rules of engagement with the Chinese economy are about to get a lot tighter, especially in high-tech sectors.

This bill sets up three major guardrails: sanctions, investment prohibitions, and mandatory divestment from certain Chinese companies. It also throws $150 million at the Treasury Department and gives agencies special, fast-track hiring authority to staff up quickly, bypassing the standard competitive service rules to get this whole thing running.

The Sanctions Hammer: Asset Freezes and Broad Power

Title I gives the President—who will delegate this authority to the Secretary of the Treasury—the power to impose sanctions on any “covered foreign person.” This definition is incredibly broad, encompassing anyone incorporated in, controlled by, or even 50% or more owned by an entity connected to the country of concern or the Chinese Communist Party’s Central Committee. If the Secretary decides someone fits this bill, they can use the powerful International Emergency Economic Powers Act (IEEPA) to freeze and block all property and interests belonging to that person or entity if it’s in the U.S. or held by a U.S. person. This is a serious, fast-acting tool that could instantly disrupt the finances of a huge number of companies and individuals worldwide, far beyond the initial targets.

The Investment Ban: High-Tech Red Lines

Title II is perhaps the biggest change for investors and companies. It prohibits U.S. persons from knowingly making investments in a “covered national security transaction” involving “prohibited technology” in the country of concern. We’re talking about cutting-edge stuff like advanced integrated circuits (e.g., logic chips at 14nm or less), extreme ultraviolet lithography components, high-power AI models, and quantum computing components. If you break this rule, the penalty is steep: the greater of $250,000 or twice the dollar amount of the transaction. The government can also force you to sell (divest) the violating investment.

Even if the technology isn't outright prohibited, U.S. persons must report certain sensitive investments to the Secretary within 30 days of the deal closing. Failure to report carries the exact same massive financial penalty. For venture capitalists, private equity firms, and even individuals dabbling in foreign tech startups, this means an entirely new layer of compliance and risk management. The bill tries to make compliance easier by allowing people to confidentially ask the government if a transaction is prohibited, but the burden of proof—and the risk of a massive fine—still rests squarely on the investor.

The Portfolio Shake-Up: Mandatory Sell-Off

Title III tackles portfolio investment, which affects many more people with 401(k)s and index funds. It requires the Secretary to review companies already on existing blacklists and potentially add them to a new Non-SDN Chinese Military-Industrial Complex Companies List. Crucially, the bill mandates that U.S. persons must divest (sell off) any stocks or securities in these listed companies. You get a 365-day grace period after the law passes to sell, but after that, holding the securities is prohibited. This means fund managers and individual investors will have to actively scrub their portfolios of any listed Chinese companies to avoid running afoul of the new rules. This could trigger a concentrated selling pressure on specific Chinese stocks, forcing a sudden and potentially large shift in global equity markets.

The Takeaway for Busy People

If you’re a professional working in finance, high-tech manufacturing, or private equity, this bill is a game-changer that requires immediate regulatory attention. The penalties are punitive, and the scope of prohibited investments is specific and technical. For the average person, the impact is less immediate but still real: your retirement funds (401(k)s, mutual funds) that track global indices will likely undergo a mandatory, forced divestment from specific Chinese companies, potentially affecting fund performance and composition. This bill is less about making things easier and more about creating clear, expensive boundaries for U.S. economic engagement with China, backed by the threat of significant fines and asset freezes.