Trump Administration Opts for Softer Approach on Chinese Investment in U.S

Geneva Stokes
June 30, 2018

President Trump had called for wide-ranging restrictions on Chinese investment in USA companies. Part of the U.S. response includes imposing tariffs on $50 billion of Chinese goods, some of which are set to go into effect next month.

The Trump administration said that it would rely on the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control foreign investments in sensitive domestic technologies rather than imposing China-specific restrictions. The president has threatened to impose an estimated $450 billion in tariffs on Beijing in an effort to reverse what he has labeled as bad trade deals with China.

The House on Tuesday approved a bill that would strengthen the CFIUS law and that bill was expected to be considered as part of a joint House-Senate conference committee reviewing a Senate-approved defence policy bill.

On Tuesday, the House easily approved a bill that would beef up reviews of foreign investments now handled by the Committee on Foreign Investment in the United States, or CFIUS. But major indexes closed lower after White House economic adviser Larry Kudlow told Fox Business Network that the CFIUS decision did not represent a more conciliatory approach to China trade issues.

News outlets including CNN reported earlier this week that the administration was considering a rule to bar firms with at least 25% Chinese ownership from buying American companies that are involved in technology that the White House considers important.

Just last week, the president threatened to impose tariffs on nearly all Chinese goods shipped to the United States, a move that reflected Navarro's enduring influence.

A May 29 statement from the White House pledged "specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology".

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The Senate Banking Committee also approved a version of the reform, so the two chambers will have to reconcile them into a single bill for Trump to sign.

After days of declines and increased volatility amid fears of a worsening trade war, USA stocks rallied, with the benchmark Dow Jones Industrial Average up 0.9 per cent shortly after 1400 GMT, echoing the more optimistic sentiment in European markets. "The NEC is at the center of all the action regarding the economy, both domestically and internationally" he said, noting he will make a decision "very soon". Trump has used the tool more frequently than past administrations. "It's confused the Chinese about what the USA really wants".

In Beijing, China's commerce ministry stressed on Thursday that it opposed using national security as grounds to restrict foreign investments.

The president can direct CFIUS to heighten scrutiny on sensitive technologies.

"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.

"Mnuchin, it seems like he is prevailing on a lot of these disputes", said Steve Moore, who was a top economic adviser to Trump during the campaign.

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