Understanding the CFIUS Framework for Foreign Investment
The Committee on Foreign Investment in the United States, or CFIUS, reviews certain foreign investments for national security risks. For Chinese investors and U.S. businesses receiving Chinese capital, the central questions are what business is being acquired, who ultimately owns or controls the investor, and which rights the investment provides. There is no single shareholding percentage below which every transaction is outside CFIUS jurisdiction.
What transactions are subject to CFIUS
CFIUS can review transactions that could give a foreign person control of a U.S. business, including acquisitions, some joint ventures, and indirect investments. Control means the ability to determine important business matters, whether or not that power is exercised. A minority stake coupled with rights over budgets, senior management, or significant contracts can confer control. This jurisdiction extends to U.S. businesses generally, including businesses outside the TID categories.
CFIUS can also review certain non-controlling investments in an unaffiliated TID U.S. business. Separately, specified purchases, leases, and concessions involving real estate at certain ports or near designated military installations may be covered. Offshore incorporation or a U.S. acquisition subsidiary does not remove foreign ownership or control further up the chain.
What TID means and what it covers
TID stands for technology, infrastructure, and data. A U.S. business needs to satisfy only one of the three categories to be a TID U.S. business. Each category has a defined legal scope.
Technology. The business produces, designs, tests, manufactures, fabricates, or develops critical technologies. These include specified defence articles and services, certain export-controlled dual-use items, designated nuclear equipment and technology, select agents and toxins, and controlled emerging and foundational technologies. An AI, robotics, semiconductor, or biotech label does not itself establish TID status; the technology’s classification and the business’s activities matter.
Infrastructure. The business performs specified functions concerning infrastructure listed in the regulations. Examples include certain telecommunications networks, submarine cables, electricity systems, pipelines, transportation facilities, and water systems. The listed function matters as well as the asset: ownership, operation, manufacturing, supply, or servicing is covered only where the relevant regulatory entry provides for it.
Data. The business maintains or collects sensitive personal data of U.S. citizens. Covered categories include specified health, financial, communications, geolocation, biometric, and security-clearance information. Many categories require an additional scale or targeting test, such as data on more than one million individuals, a qualifying objective to reach that scale, or services targeting specified government agencies or personnel. Identifiable genetic-test results have a separate rule without the one-million-person threshold. Exceptions also apply.
How investor rights and ownership percentages interact
A non-controlling investment in a TID business may be covered if it provides material nonpublic technical information, board membership or observer rights, a board nomination right, or involvement beyond ordinary share voting in specified substantive decisions about technology, infrastructure, or sensitive data. There is no general minimum equity percentage for this category. For example, a 5% investment with a board observer right can be covered.
| Percentage | Meaning within the framework |
|---|---|
| 10% or less | An exclusion from control jurisdiction applies only where the investment is solely passive under the regulatory definition. Covered TID rights defeat that passive status. |
| Above 10% | The specific passive-investment exclusion is unavailable. Review is not automatic; control and covered TID rights still require analysis. |
| 25% or more | Relevant to the foreign-government substantial-interest filing rule and, separately, certain upstream ownership tests for critical-technology filings. It is not a universal jurisdiction threshold. |
| 49% or more | Relevant to the foreign-government interest in the investor under the substantial-interest rule, subject to attribution and fund rules. It is not a safe limit for state capital. |
Which holdings are generally lower risk
A holding of 10% or less of outstanding voting interests, acquired and held solely for passive investment, benefits from an express exclusion from covered control transactions. The investor must have no intention or power to control and no covered TID access, rights, or involvement. The protection depends on both the documents and actual conduct. A 9.9% stake with a board appointment or strategic veto is not automatically passive.
A non-controlling investment without covered TID rights can also fall outside business-investment jurisdiction, including above 10%, depending on the facts. Non-voting shares are not automatically exempt if contractual rights confer control or covered access. Likewise, keeping state ownership below 49% or the target investment below 25% does not by itself establish that CFIUS lacks jurisdiction.
How state capital affects the analysis
State capital has two distinct effects: it can trigger a specific mandatory filing requirement, and it can affect the national security assessment of an otherwise covered transaction. The analysis includes direct and indirect interests of national and subnational governments, including interests held through state-owned enterprises or government investment vehicles.
Subject to exceptions, the substantial-interest rule generally requires a filing where a foreign investor acquires at least 25% of the voting interests in a TID U.S. business and the national or subnational governments of a single foreign state, other than an excepted foreign state, hold at least 49% of the voting interests in that investor. China does not qualify as an excepted foreign state. For example, a 60% government-owned investor acquiring a 30% voting stake in a TID business generally meets these thresholds.
Indirect interests cannot always be calculated by simply multiplying ownership percentages. Under the applicable attribution rule, a parent’s interest in its subsidiary is deemed to be 100% for this calculation. For an entity primarily directed by a general partner or managing member, the government substantial-interest test focuses on whether the government holds at least 49% of the interest in that manager. A government limited partner’s capital commitment is therefore not automatically equivalent to the same voting interest in an ordinary company.
Separately, qualifying investments through funds managed exclusively by a non-foreign general partner may benefit from specific exclusions or filing exceptions. The foreign limited partner must satisfy the applicable limits on fund control, investment decisions, and information access. A fund’s U.S. registration or a “passive LP” label does not establish eligibility by itself.
When smaller stakes can still require a filing
The critical-technology mandatory filing rule is separate from the government substantial-interest rule. A covered investment may require a filing if the relevant technology would require a specified U.S. export authorization to the direct investor or certain upstream foreign persons, subject to exceptions. The upstream test generally includes a 25% voting-interest threshold with special attribution, fund, and aggregation rules. It does not impose a 25% minimum stake in the U.S. target. Even a small covered investment can require a filing, without any state capital.
Conversely, falling below the government filing thresholds does not eliminate state influence as a national security consideration. Government appointment rights, contractual influence, financing relationships, and the target’s sensitivity can remain relevant. The framework therefore requires separate conclusions on jurisdiction, mandatory filing, and national security risk. Most filings are voluntary, but a covered transaction that is not filed may still be reviewed after closing.
Sources and status
Current to October 25, 2026. Principal authorities are Section 721 of the Defense Production Act and 31 CFR Parts 800 and 802. Key provisions include sections 800.208, 800.211, 800.215, 800.241, 800.243, 800.244, 800.248, 800.256, 800.302, 800.307, and 800.401, and Appendix A to Part 800.