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.
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.”
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.
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.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.
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.
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.
