The guidelines were announced as part of US President Joe Biden's $50bn (£43bn) plan to boost the domestic production of semiconductors.
The news is the latest development of a long-running technological dispute between Washington and Beijing, as US firms demand more government support to reduce reliance on components produced in Chinese factories.
"We're going to be implementing the guardrails to ensure those who receive Chips funds cannot compromise national security. They're not allowed to use this money to invest in China, they can't develop leading-edge technologies in China for a period of ten years," said Gina Raimondo, US Commerce Secretary.
The ban on the building of new technology factories in China comes only a week after US chipmaker Nvidia revealed it had been told by the US Department of Commerce to halt exports of some of their artificial intelligence (AI) technology to China, due to a potential risk of the products...