WASHINGTON–A newly released U.S.-China Economic and Security Review Commission (USCC) report has called for a complete ban on China’s state-owned or state-controlled companies from buying U.S. assets. The policy recommendation reflects the growing concern in Congress and among China experts that China’s incursions into the U.S. economy, especially in areas sensitive to national security, might eventually help provide weapons for the Chinese regime to attack the United States.
The annual report was produced by the congressionally-mandated USCC and released on Nov. 15. Among the report’s 600-pages of discussion of the developments in U.S.-China economic and security issues, its list of recommendations for U.S. policymakers include “prohibiting the acquisition of U.S. assets by Chinese state-owned or state-controlled entities, including sovereign wealth funds.”
China’s foreign direct investments (FDI) in the United States have been continuously booming for years, reaching a record high of $45.6 billion in 2016—triple the total from the year before, according to a separate report by the economic research firm Rhodium Group released earlier this year. Many of these investments are made by China’s state-owned enterprises (SOEs), which are controlled by the Chinese regime.
“Chinese FDI is targeting industries deemed strategic by the Chinese government, including information and communications technology, agriculture, and biotechnology,” the USCC report says. “These investments lead to the transfer of valuable U.S. assets, intellectual property, and technology to China, presenting potential risks to critical U.S. economic and national security interests.”
What makes the matter worse, according to the USCC report, is the fact that Chinese SOEs can evade legal action in the United States by invoking their status as a foreign government entity under the Foreign Sovereign Immunities Act.
“The opaque nature of China’s financial system makes it impossible to verify the accuracy of Chinese companies’ financial disclosures and auditing reports. Chinese businesses continue to list on U.S. stock exchanges to raise capital, despite operating outside the laws and regulations governing U.S. firms,” the report says.
At USCC’s hearing marking the report’s release, Michael Wessel, a USCC commissioner, said the report’s suggestions specifically target Chinese SOEs. Private Chinese companies are still subject to security reviews that focus “on the nature of assets” related to national security.
Although the report only recommends the banning of Chinese SOEs, private Chinese companies would still be subjected to security reviews to examine their acquisition of U.S. assets in the context of national security, according to Wessel.
Congress and Experts Push for ‘Long Overdue’ Scrutiny
According to Gordon Chang, an analyst who specializes in East Asia economic and security, Chinese acquisition of American assets is a serious issue to which scrutiny and policy responses have been “long overdue.”
“China has been buying technologies that have military applications, and no one [in the United States] wants to see that.” Said Gordon Chang.
While the USCC’s report in 2016 also made the same recommendation to completely ban Chinese SOEs from acquiring U.S. assets, Chang points out that there is now a higher chance for it to be actually enforced. With the Trump administration in power, new people are steering the U.S. policy toward China, Chang said.
The U.S. Congress has also launched its own initiative to tackle Chinese investments. Just last week, the Senate’s number 2-ranking Republican, John Cornyn, introduced a bill known as the Foreign Investment Risk Review Modernization Act (FIRRMA) that he said will prevent foreign investments in the United States that pose a risk to national security.
While the bill does not specifically name China, it was clearly in the crosshairs when Cornyn delivered a strongly worded speech on Tuesday saying that “it’s time for the U.S. to adopt a new policy on China” as it is “vacuuming up U.S. technologies whenever it can.”
From The Epoch Times