Republican urges Biden to restrict U.S. investments in China

Republican urges Biden to restrict U.S. investments in China

U.S. Representative Urges Biden to Implement Restrictions on Outbound Investment in China

US-China Investment

In a letter addressed to President Joe Biden, Representative Mike Gallagher, chair of the select committee on China, has called for expansive restrictions on outbound U.S. investment in China, specifically in sectors that may pose a threat to U.S. national security. Gallagher emphasizes the importance of including both private and public market investments in these restrictions. This request is the latest in a series of efforts by lawmakers from both parties to enforce stringent limitations on U.S. investment in China. Sources have indicated that the Biden administration is indeed likely to adopt new outbound investment restrictions on China in the near future.

For over two years now, U.S. lawmakers have been urging the Biden administration to enhance oversight of investments by American companies and individuals in China. Gallagher highlights the concerns regarding U.S. investment in China, stating that it not only poses significant risks to national security but also exposes Americans to financial risks and implicates them, often unknowingly, in human rights abuses. These concerns have prompted the push for tighter investment regulations.

It was reported in July that the Biden administration is finalizing an executive order which would impose restrictions on investments in sectors such as advanced semiconductors, quantum computing, and artificial intelligence. Gallagher emphasizes that it is crucial to restrict investments in key sectors that are relevant to national security and integral to China’s technological progress. The objective is to ensure that U.S. capital does not inadvertently support the People’s Liberation Army’s (PLA) buildup, facilitate the Chinese Communist Party’s (CCP) human rights abuses or techno-totalitarian surveillance system, or deepen the United States’ dependency on China in critical supply chains.

Although the White House declined to comment on Representative Gallagher’s letter, the Chinese Embassy in Washington spokesperson, Liu Pengyu, accused the United States of habitually politicizing technology and trade issues and using them as tools and weapons in the name of national security. Pengyu stated that China would closely monitor the developments and firmly protect its rights and interests.

Gallagher’s request to President Biden also emphasizes protecting shareholder rights. He proposes that Chinese companies should meet the same due diligence standards as American companies. Furthermore, he urges the implementation of predictable investment restrictions that provide certainty to investors, without creating an onerous case-by-case screening process. Gallagher also suggests that Biden consult with allies and partners before implementing new restrictions and encourage them to adopt parallel restrictions on investing in China.

In a related development, the Senate recently passed legislation requiring notification of certain outbound investments in China with an overwhelming majority. Commerce Secretary Gina Raimondo has expressed the need for restrictions on U.S. investors to be defined in a manner that is not overly broad.

Representative Gallagher disclosed that the committee is currently investigating BlackRock and MSCI for their involvement in facilitating the flow of American capital into companies that have been found guilty by the U.S. government of contributing to China’s military advancement or human rights abuses. The committee aims to hold these companies accountable for their actions.

In conclusion, Representative Gallagher’s letter to President Biden demonstrates the strong push for imposing restrictions on outbound U.S. investment in China. The concerns surrounding national security risks, financial risks, and potential complicity in human rights abuses have prompted these efforts. The request highlights the need to restrict investments in sectors crucial to China’s technological rise, while also protecting shareholder rights and ensuring predictable investment restrictions. The Biden administration’s likely adoption of new restrictions reflects the ongoing efforts to address the complex nature of U.S.-China economic relations.