US Federal Senate Bill SB3640

US Federal 2025-2026 Regular Session

• Introduced: 1/14/26
• Refer: 1/14/26

Caption

Divesting from Communist China’s Military Act of 2026

Summary

SB 3640, titled the "Divesting from Communist China’s Military Act of 2026," would require the Secretary of the Treasury to add any entity identified by the Secretary of Defense as a Chinese military company operating directly or indirectly in the United States to Treasury’s Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List), if it is not already on that list. Once added, the bill would trigger the sanctions and investment prohibitions associated with Executive Order 13959, as amended by Executive Order 14032, subject to a one-year divestment window for U.S. persons to buy or sell publicly traded securities solely to exit positions. The bill is built around congressional findings that Chinese military companies and military-civil fusion contributors pose national security risks and that U.S. capital can help finance China’s military, intelligence, and security apparatuses. It also notes that the Department of Defense already faces procurement restrictions on certain Chinese military companies, but that those firms may still be able to raise capital through U.S. securities markets. The legislation is designed to align Treasury’s investment restrictions more closely with Defense Department designations and to make sanctions treatment more consistent across federal regimes.

Impact

If enacted, the bill would expand the practical reach of U.S. investment restrictions by automatically linking Defense Department designations of Chinese military companies to Treasury’s NS-CMIC List. That would extend the Executive Order 13959/14032 prohibitions to newly designated entities within 60 days, while preserving a one-year divestment period for U.S. persons holding publicly traded securities. The bill would primarily affect Chinese companies designated under section 1260H of the FY2021 NDAA, U.S. investors, financial institutions, and market intermediaries that trade in those securities, and it would reinforce existing sanctions and procurement restrictions without creating a new standalone sanctions framework.

Sentiment

The bill’s tone and framing are strongly supportive of tougher restrictions on Chinese military-linked entities, and the sponsors are all Republicans. The findings reflect a national security-focused consensus that U.S. capital should not support China’s military modernization or surveillance capabilities. No committee transcript or vote data is provided, so there is no recorded debate or bipartisan vote history to indicate broader legislative sentiment beyond the bill’s introduction and referral.

Contention

The main point of contention is likely to be the scope and automatic nature of the designation-and-sanctions linkage. Supporters would view the bill as closing a gap that allows sanctioned or restricted entities to still access U.S. capital markets, while critics may argue it could sweep in companies with mixed commercial and state ties, increase compliance burdens, and further escalate U.S.-China financial decoupling. Another possible issue is the reliance on executive-branch designations and the breadth of the definition of publicly traded securities, which could affect investors, exchanges, and funds with indirect exposure to covered entities.