The US Department of the Treasury is planning to heighten scrutiny of Chinese investments in sensitive US industries under an emergency law, putting Washington’s trade war with Beijing on a potentially irreversible course.
Under the plan, the White House would use one of the most significant legal measures available to declare China’s investments in US companies involved in technologies such as new-energy vehicles, robotics and aerospace a threat to economic and national security, according to eight people familiar with the plans.
US Secretary of the Treasury Steven Mnuchin, in a report scheduled to be released on Friday, will suggest administering that law through an inter-agency government panel called the Committee on Foreign Investments in the US (CFIUS), the people said, requesting anonymity to discuss the plans.
A Treasury spokesman did not immediately reply to a request for comment.
China’s Ministry of Commerce did not immediately respond to Bloomberg’s inquiry about the report of the US’ planned investment curbs.
One concept under review would be to create a two-tracked CFIUS process to review investments, with one specifically for China, two of the people said.
“It is now clear that [US President Donald] Trump’s policy is not about the trade deficit,” said Raymond Yeung Yeung (楊宇霆), chief greater China economist for Australia and New Zealand Banking Group Ltd in Hong Kong. “Security risks can be applied to every aspect in a bilateral relationship, investment restrictions in particular.”
Mnuchin has been working on the plans since as early as December last year, although he has argued for taking a less aggressive approach, the people said.
In the end, he has been persuaded by other members of the Cabinet and the president to use blunt tools to address growing national security risks from Chinese investments, they said.
Some administration officials are concerned that declaring a national economic emergency could hammer the stock market or hurt US firms operating in China, they said.
The South China Morning Post on Sunday reported that China has no plan to target US companies operating in the nation amid escalating trade tensions, but additional steps by the White House might change that assessment.
Following talks yesterday in Beijing, Chinese Vice Premier Liu He (劉鶴) — President Xi Jinping’s (習近平) top economic adviser — said China and the EU had agreed to defend the multilateral trading system.
They vowed to oppose protectionism and unilateralism, saying those actions could push the world into recession in an apparent rebuke to the US
The US national emergency law, called the International Emergency Economic Powers Act of 1977 (IEEPA), would target prospective investments, meaning that existing ones cannot be undone, four of the people said.
It is unclear what would happen to deals that have been announced, but not yet completed.
Trump’s National Trade Council Director Peter Navarro has been laying the groundwork to escalate what he has so far called a “trade dispute.”
Much of China’s “behavior constitutes an economic aggression,’’ Navarro said during a telephone briefing with reporters. “It is critical both for the interests of the United States as well as for the integrity and proper functioning of the global economy that the Chinese cease these kinds of behaviors.’’
The Treasury’s move is part of the Trump administration’s actions taken under Section 301 to respond to China’s alleged theft of US intellectual property.
The IEEPA allows the president to unilaterally impose the investment limits.
The people briefed on the latest action said the Treasury limits would be rolled out in phases, meaning not all “Made in China 2025” sectors would be covered at once.
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