Trump to Use US Security Review Panel to Curb China Tech Investments

June 28, 2018 Updated: June 29, 2018

WASHINGTON—President Donald Trump said on June 27 he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.

The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control investment deals. The legislation expands the scope of transactions reviewed by the interagency panel in order to address security concerns, Trump said.

“We’re going to treat China the way we’re going to treat other people, and to the extent that we’re worried about transactions, we will block them,” Treasury Secretary Steven Mnuchin said on CNBC on June 27. “But we are not going to, on a wholesale basis, discriminate against China as part of a negotiation.”

The investment restrictions are part of the administration’s efforts to pressure Beijing into making major changes to its trade, technology transfer, and industrial subsidy policies. The administration has called out China for unfairly acquiring American intellectual property through joint venture requirements, unfair licensing, and strategic acquisitions of U.S. tech firms.

On June 24, government officials told media that the administration was considering restrictions that would focus solely on Chinese investment deals, by invoking the International Emergency Economic Powers Act of 1977—which gives the president sweeping authority to restrict assets based on national security concerns.

“I have concluded that such (CFIUS) legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said in a statement that did not specifically name China.

Senior administration officials told reporters on a conference call that sticking with CFIUS, a process companies are familiar with, would ensure strong inward investment into the United States while protecting the “crown jewels” of U.S. intellectual property.

Trump said in his statement that upon final passage of the CFIUS legislation, known as the Foreign Investment Risk Review Modernization Act, he will direct his administration “to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies.”

If Congress fails to pass the legislation quickly, Trump said, he would direct the administration to implement new restrictions under executive authority that could be applied globally.

The decision to stick with CFIUS was a pragmatic move because the new CFIUS legislation “will put a crimp in China’s efforts to move up the value chain in high tech,” said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.

By David Lawder and Doina Chiacu