GOP Lawmakers Want to Know How Much US Investment Is Supporting China

US investment into China is already on the decline, data show.
GOP Lawmakers Want to Know How Much US Investment Is Supporting China
Sen. Marco Rubio (R-Fla.), chairman of the Small Business and Entrepreneurship Committee, speaks at the senate hearing "Made in China 2025 and the Future of American Industry" in Washington on Feb. 27, 2019. Jennifer Zeng/The Epoch Times
Andrew Moran
Updated:
0:00

Several Republican lawmakers submitted legislation that attempts to expose how much U.S. investment is flowing to China and supporting sensitive sectors and companies trying to undermine the United States.

Sens. Marco Rubio (R-Fla.) and Rick Scott (R-Fla.) introduced the American Investment Accountability Act on Dec. 12. The proposal aims to enhance the quality and bolster the frequency of outbound investment data as part of transparency efforts. The legislation also would mandate that information about U.S. investment in China be given to Congress regularly.

The bill would require the Treasury Department to report on portfolio investments that surpass $10 million in a single transaction or $25 million in aggregate. The Department of Commerce would be mandated to report on direct investments exceeding $5 million in a single transaction or $10 million in aggregate.

Both federal departments would be forced to apply national corrections to their data to better monitor the extent of investment into “countries of concern” and to break down investment flows by economic sector and share investments “into sanctioned entities.” The Securities and Exchange Commission (SEC) would be required to report on “joint ventures, mergers and acquisitions, spin-offs, and greenfield investments into countries of concern.”

“Our current investment reporting policies have critical information gaps,“ Mr. Rubio said in a statement. ”This bill would ensure that policymakers have access to accurate data on investments by Americans into Communist China.”

Other Lawmakers in Support

Sen. Tim Scott (R-S.C.), a co-sponsor of the legislation, noted that companies controlled by the Chinese Communist Party (CCP) are taking advantage of U.S. markets to funnel immense amounts of capital, data, and information back to the regime in Beijing.

“We need transparency about how money is flowing out of the U.S. and this bill would create the transparency and disclosures required to understand the true influence of Communist China in our markets,” Mr. Scott said.

Rep. Elise Stefanik (R-N.Y.) introduced companion legislation in the lower chamber “to ensure that there is accurate and timely information on the true scope and nature of American investments into Communist China and other adversarial countries.”

This isn’t the first time Republican lawmakers have tackled U.S. investment in China.

Since 2019, Mr. Rubio has pushed for bipartisan efforts to prevent the Federal Retirement Thrift Investment Board from investing retirement savings in Chinese firms. As a result, in November, the $771 billion U.S. federal pension fund decided to exclude China and Hong Kong investments amid geopolitical tensions.

“Communist China should not profit from the retirement accounts of U.S. government employees and servicemembers,” Mr. Rubio said.

State of US Investments in China

For the past 15 years, U.S. foreign direct investment in China has accelerated, topping $125 billion in 2022. However, the global market landscape is shifting as more asset managers and investors become wary of parking their money in the world’s second-largest economy.
Overall, about 1 percent of the volume of U.S. direct investment abroad is situated in China.

This downward trend has also been seen beyond the borders of the United States. The measurement of foreign investment into China turned negative for the first time since records started in 1998. Likewise, data from the State Administration of Foreign Exchange of China show that direct investment by foreign firms in China plummeted by 87 percent year-over-year in the second quarter, the sharpest drop in more than two decades.

Market analysts say the recent data suggest that there are greater divestments than new investments, whether it be due to diversification of supply chains or national security worries. Of course, this doesn’t mean that investment is drying out entirely.

According to a report by the Coalition for a Prosperous America, Wall Street index funds have been inserting many Chinese companies into their investment vehicles, including some that the U.S. government blacklists over connections to the Chinese military.

This past summer, a probe by the House Select Committee on the CCP found that investment titan BlackRock used U.S. citizens’ assets to invest in Chinese companies backed by Beijing.

BlackRock's offices in New York on July 16, 2018. (Lucas Jackson/Reuters)
BlackRock's offices in New York on July 16, 2018. Lucas Jackson/Reuters

In response to these growing concerns, the White House announced new restrictions on U.S. private investment in various sectors, such as artificial intelligence, semiconductor technology, and quantum mechanics. However, a chorus of Republicans say the measures don’t go far enough to include other industries, such as biotechnology and energy technology.

“The Biden administration is committed to keeping America safe and defending America’s national security through appropriately protecting technologies that are critical to the next generation of military innovation,” the Treasury Department said in an August statement.

While the Chinese regime complained about the restrictions, experts argue that Beijing will unlikely engage in blow-for-blow retaliation.

The United States is participating in a “de-risking” initiative by expanding its list of trading partners. China’s economy is also in the middle of a downturn, with exports plummeting in eight of the past 11 months and manufacturing activity shrinking.
“Beijing has few options to respond to the new U.S. actions without inflicting collateral damage on its own economy,” wrote Paul Haenle, the Maurice R. Greenberg director’s chair at the Carnegie Endowment for International Peace.
Andrew Moran
Andrew Moran
Author
Andrew Moran has been writing about business, economics, and finance for more than a decade. He is the author of "The War on Cash."
Related Topics