A push in Washington to scrutinise investments by US firms in China may fail to be included in new legislation because of a clash of views among lawmakers in the House of Representatives.
The law, requiring US companies to notify federal agencies of investments in Chinese technologies such as chips and artificial intelligence, was to be passed as an amendment to a $886-billion defence policy bill.
But “it doesn’t look like it’s going to make it” in the bill, Republican John Cornyn, one of the two senators who proposed the legislation, told Politico on Wednesday.
Cornyn told Politico that the legislation was facing opposition from House Financial Services chair Patrick McHenry, who has been a vocal opponent of China investment curbs.
In September, McHenry had criticised Washington’s moves against investments to China at an oversight hearing of the Committee on Foreign Investment in the United States (CFIUS).
McHenry said that the Biden government’s move to use CFIUS — which reviews national security implications of foreign investments in US firms — as a tool to scrutinise outbound investments into China was “nonsense.”
“If you oppose Beijing’s state-owned enterprises, you want more Western investment in China — not less,” McHenry said.
“If you are concerned about Chinese technology companies, you want more Americans in control of them — not fewer.”
McHenry added that more American executives were needed on the boards of Chinese firms to ensure that US sanctions and export controls were effectively implemented.
“This is precisely why Xi Jinping has been attacking Western influence in Chinese companies.”
McHenry’s views are largely at odds with a majority of US lawmakers for whom China has quickly become an adversary that needs to be tackled with swift, aggressive measures.
The China investment curbs he is currently said to be blocking — the Outbound Investment Transparency Act (OITA) — were passed with an overwhelming majority in the US Senate in July.
They were, however, a watered-down version of the OITA which initially proposed to empower the US Treasury Department to stop specific deals.
Now, if the House of Representatives goes on to drop the legislation altogether from the National Defense Authorization Act (NDAA), the Biden administration will need to look for other measures to clamp down on outbound investment to China.
For a bill to become law, the US House and Senate both need to pass it with a majority vote before it is sent to the president for his signature.
The final decision on China investment curbs is likely to become clear in the coming days, with US congressional negotiators vowing to enact the NDAA this year.
The key defence bill aims to make the investments in the US military “to maintain overmatch with China” in the face of “threats” from Beijing.
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Multiple moves targeting China tech
US President Biden, meanwhile, has already a signed an executive order that requires investment funds to notify and take approval from the US Treasury Department of any investments into ‘sensitive technologies’ in China. The tech in focus includes semiconductors, quantum technology and artificial intelligence.
The order, issued in August, is likely to come into effect from 2024 and will not be applicable to past investments.
However, Republican and Democratic leaders of a US congressional committee on China urged Treasury Secretary Janet Yellen last month to implement the measures ‘urgently’.
Earlier this month, two US senators also introduced a bipartisan bill requiring private equity firms to make public how much they invest in China.
The bill, by Democratic Senator Bob Casey and Republican Senator Rick Scott, aims to curb the flow of American dollars into “adversaries, like Communist China” which “benefit from a complete lack of transparency.”
Senator Casey is also a co-sponsor on the Outbound Investment Transparency Act along with Senator Cornyn.
US private investment firms invested more than $80 billion into China between 2018 and 2022, Casey’s office said.
- Vishakha Saxena