Under the proposed program, there would be both prohibited and notifiable transactions. In their analysis last week, our International Trade and National Security team broke down set of restricted transactions into categories. The largest targets are the quantum computing and advanced semiconductor and microelectronics industries, which is consistent with the government’s decision last fall to expand other trade controls on these sectors.

Key takeaways for private equity

• No immediate restrictions. Although the executive order authorizes the Treasury Department to promulgate new regulations, there are no immediate restrictions on outbound investment. Nevertheless, investors should assess potential transactions that may close next year against the program outlined in the ANPRM.
• Forward-looking. The regulations would not be intended to cover transactions entered into before Aug. 9. The Treasury Department may, however, request information about transactions completed or agreed to after Aug. 9 to better inform the development and implementation of the program.
• Restrictions apply to only certain types of investments. The proposed program would impact only transactions that create or acquire an ownership interest in a covered entity: joint ventures, greenfield investment, debt financing and equity. It would not capture ordinary commercial transactions or many forms of purely passive investment.
  
  Covered entities may include Chinese subsidiaries of non-Chinese parent companies if the subsidiary engages in one of the activity types related to covered national security technology or products and comprises more than 50% of the non-Chinese company’s consolidated revenue, net income, capital expenditure or operating expense. Thus, investors should consider the entire corporate structure when determining whether a transaction falls within the proposed program, rather than focusing solely on the entity being directly acquired.