White House decides against outright limits on Chinese investment
White House decides against outright limits on Chinese investment
Trump crackdown on China investment in US, chooses lighter option
28 June, 2018, 05:58
Trump on Tuesday pushed back on recent reports that the USA was preparing the investment restrictions.
After fears that Trump would introduce harsh measures to curb Chinese investment in US-based technology companies, the U.S. president chose to use less stringent methods to curb the practice, including the expanded use of the Committee on Foreign Investment in the United States, or CFIUS.
"The administration is wise to set aside rumoured plans for broad, blunt executive action that could have hurt American manufacturers and consumers", said Rep. Ed Royce, R-Calif., the chairman of the House Foreign Affairs Committee.
"We are not, on a wholesale basis, discriminating against China as part of a negotiation", Mnuchin said on CNBC on Wednesday.
"After reviewing the current versions of FIRRMA with my team of advisors - and after discussing them with many Members of Congress - I have concluded that such 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. The legislation expands the scope of transactions reviewed by the interagency panel to address security concerns, Trump said. After CFIUS' review, the president can block transactions found to pose a threat to the national security of the United States, the official added.
Treasury Secretary Steven Mnuchin, who chairs the investment committee, rejected the idea that the administration had softened its stance after seeing the turbulence in financial markets. 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. The committee's powers are likely to be strengthened through legislation that is now pending in Congress.
Art Hogan, chief market strategist at Wunderlich Securities, said the Trump administration had "a confusing message on trade, nearly to the point where they're making it up as they go along".
"The Treasury Department either couldn't or wouldn't seek to impose caps on Chinese investment in the United States in the same manner China restricts United States ownership of Chinese companies because of opposition from the business community, the defence department and Treasury Secretary Mnuchin", Henrietta Treyz, a managing partner at Washington-based investment consultancy Veda Partners, said in a research note.
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.
The tariffs that Trump has already announced against China involve goods in aerospace, IT, robotics and machinery sectors.
FIRRMA would require more companies that invest in, or form joint ventures with, certain U.S. businesses, not only to submit to a review by CFIUS, but to pay the agency at least US$300,000 for the work.
U.S. President Donald Trump and China's President Xi Jinping arrive at a state dinner at the Great Hall of the People on November 9, 2017 in Beijing, China.
"It's going to be very comprehensive and very effective at protecting our technological family jewels in the United States".
In its current form, CFIUS had already become more active in blocking proposed U.S. investments by Chinese companies over the past year.
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