News ID: 213544
Published: 0608 GMT April 20, 2018

US considers emergency curbs on Chinese tech investment

US considers emergency curbs on Chinese tech investment

The US President Donald Trump administration is considering declaring a national economic emergency to impose new restrictions on Chinese investment as part of a trade crackdown on Beijing, a senior US Treasury official confirmed.

Heath Tarbert, assistant Treasury secretary for international markets and investment policy, told a Washington conference that the administration was looking at invoking the International Emergency Economic Powers Act (IEEPA) as part of an investment crackdown ordered by President Donald Trump last month, reported.

The law would give the president broad powers to restrict Chinese investment in sensitive sectors such as semiconductors and robotics that the administration is concerned Beijing is targeting as part of a strategic push to acquire US technology. 

The move comes amid signs that increased scrutiny of Chinese inbound investments into the US has already put a damper on capital flows.

Foreign direct investment between the world’s two largest economies has already been hit by rising trade tension and increased scrutiny from the Committee on Foreign Investment in the US (Cfius) — which reviews transactions for potential national security threats — for Chinese transactions.

Last year, Chinese FDI into the US fell to $29 billion from a record $46 billion in 2016, according to the Rhodium Group, a consultancy that tracks investment flows between the world’s two largest economies.

IEEPA’s potential use has been reported previously, but Tarbert is thought to be the first US official to acknowledge publicly that the administration was considering the move. 

The potential move is part of the US’s ‘Section 301’ investigation into the alleged Chinese theft of US intellectual property and practice of forcing technology transfers from foreign investors.

That probe has already resulted in threats by Trump to impose tariffs on up to $150 billion in imports from China that have provoked vows to retaliate from Beijing and fears of a potential trade war. 

The Treasury department is drafting a plan for new investment restrictions that would go beyond the national security limitations administered by Cfius. Congress is also considering legislation that would expand Cfius’ remit to cover outbound investments in joint ventures in China and other countries. 

“We have separate offices in Treasury which are considering those two issues distinctly,” Tarbert told an Institute of International Finance conference on the sidelines of this week’s World Bank and International Monetary Fund spring meetings. 

The Treasury has until late May to send its plan for new investment restrictions to Trump. 

But the legislation to reform Cfius has also run into opposition from major business groups, including IBM and GE, which are concerned that the proposed measures on outbound investment are too broad. 

John Cornyn, the Texas Senate Republican who is the Cfius legislation’s chief sponsor, lashed out at opponents of the bill, who have been seeking to rein in its scope. 

“The Cfius process wasn't originally designed and is now insufficient to address today's rapidly evolving technology as well as the threats to our technological edge,” he said.

“I believe that the opponents of the reforms that I’ve just talked about are trying to perpetuate the status quo as long as possible, not to protect our national security interests but just the opposite, so they can bolster their bottom line.”

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