Chinese investment in U.S. tech to be scrutinized for security risks
July 3, 2018 Category Foreign investment, Weekly
The U.S. Treasury Department is planning to heighten scrutiny of Chinese investments in sensitive U.S. industries under an emergency law. It would declare China’s investment in certain U.S. companies a threat to economic and national security. It would apply to companies involved in technologies such as new-energy vehicles (NEVs), robotics and aerospace. The measure would block firms with at least 25% Chinese ownership from buying U.S. companies in “industrially significant” technologies. It would be up to the Committee on Foreign Investments in the U.S. (CFIUS) to implement the policy.
The International Emergency Economic Powers Act (IEEPA) of 1977 will target prospective investments, meaning existing ones cannot be undone, but it is unclear what would happen to deals that have been announced but not yet completed. The U.S. National Security Council and Commerce Department are also devising plans for “enhanced” export controls to prevent such technologies being shipped to China. The investment and export controls are designed to hamper the Made in China 2025 strategy for China to become a global leader in 10 high-tech sectors. The planned investment restrictions would not distinguish between Chinese state-owned and private companies.
The IEEPA statute allows the President to unilaterally impose the investment limits. Congress, in parallel, is working on reform legislation for the CFIUS that would scrutinize all inbound investment in the U.S. on national security grounds, the South China Morning Post reports.
But after stock indices, including the Dow Jones Industrial Average dropped, Treasury Secretary Steven Mnuchin said that investment restrictions would not be limited to China, “but apply to all countries that are trying to steal our technology”.
Meanwhile, the Chinese government was trying to downplay the significance of the “Made in China 2025” strategy. The ambitious plan to give the country a leading edge on several hi-tech fronts, has become a thorny issue between China and its trading partners, including the U.S. and the EU.
In the past 12 months, the Ministry of Commerce published close to 190 “Made in China 2025” articles on its website, ranging from government documents that established national demonstration areas for the project, to promotional materials that lauded its benefits to the southern African country of Zambia. But in the last three months, the number of articles published on the site plunged to nine, with just two in the last 30 days, the South China Morning Post reports.
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