US President Donald Trump on Wednesday said that he supports tougher restrictions on foreign investment in sensitive technology, as well as export controls on such goods, but he stopped short of imposing specific restrictions on China.
Following a report that raised “very serious issues” on China’s trade and investment practices, Trump decided that a plan in the US Congress to enhance the powers of the Committee on Foreign Investment in the US (CFIUS) was “the best approach to protect critical technology.”
In a statement, Trump said that if Congress fails to pass strong enough legislation to protect “the crown jewels of American technology and intellectual property,” then he would take further action.
After a year-long investigation into China’s trade policies, the White House on May 29 said that it planned to announce “specific investment restrictions and enhanced export controls” by tomorrow targeting China’s efforts to acquire “industrially significant technology.”
However, Trump backed away from singling out China and instead supported broader measures that would apply to any country.
The US House of Representatives and Senate have each approved a bill to boost the authority of CFIUS, an interagency body that reviews potential foreign investments, to broaden the types of deals subject to oversight. Now the two chambers need to reconcile them into a single bill for Trump to sign.
Trump said the legislation would offer “additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity.”
China yesterday said that it was closely following the bill and countries should be liberalizing policies to attract investment.
“We do not support tightening foreign investment requirements on the grounds of national security,” Chinese Ministry of Commerce spokesman Gao Feng (高峰) said.
Even the hint of a possible CFIUS review can kill a potential investment, and the committee has blocked Chinese investment in semiconductors and targeted Russian nuclear investment.
Chinese investment in the US fell 35 percent last year from a record US$45.6 billion in 2016 and has slowed to a trickle, just US$1.4 billion in the first quarter of this year, said Rhodium Group, a research firm.
Chinese companies have concerns about the stability of policies in the US, Gao said.
“Capital votes with its feet,” he told a news conference.
Trump also told the US Department of Commerce to look at new export controls to “further ensure a robust defense of American technology and intellectual property.”
Industry officials and trade experts applauded the decision to refrain from going after China specifically.
“It is a welcome surprise given the other signals” from the administration, National Foreign Trade Council vice president Jake Colvin said.
The CFIUS reform in Congress “was the result of extensive process of stakeholder engagement,” so allowing the legislative effort to continue is the “proper path to focus on right now, rather than specific China restrictions,” Colvin told reporters.
Still, US Secretary of the Treasury Steven Mnuchin dismissed the idea that the administration is going soft on China.
“For those who want to say it’s us being weak on China, the answer is no,” he said.
Analysts pointed to comments from US National Economic Council Director Larry Kudlow saying that tougher action on China was still being contemplated.
“The president is unsatisfied with their response on trade talks and so he put out there the possibility of additional tariffs,” Kudlow told reporters. “The ball is in their court.”
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