US plans new curbs on Chinese investment, citing security risk

Bloomberg

The Treasury Department is planning to heighten scrutiny of Chinese investments in sensitive US industries under an emergency law, putting Washington’s trade war with Beijing on a potentially irreversible course.
Under the plan, the White House would use one of the most significant legal measures available to declare China’s investment in US companies involved in technologies such as new-energy vehicles, robotics and aerospace a threat to economic and national security, according to eight people familiar with the plans.
Treasury Secretary Steven Mnuchin, in a report scheduled to be released on June 29, will suggest administering that law through an inter-agency government panel called the Committee on Foreign Investments in the US, or CFIUS, the people said, requesting anonymity to discuss the plans.
One concept under review would be to create a two-tracked CFIUS process to review investments, with one specifically for China, two of the people said. A Treasury spokesman did not immediately reply to a request for comment.
China’s Ministry of Commerce didn’t immediately respond to Bloomberg’s inquiry about the report of planned investment curbs from the US At a regular briefing in Beijing on Monday, foreign ministry spokesman Geng Shuang said China wants the US to treat commercial activities objectively and pointed out that Chinese investment has created a lot of jobs and tax income in the US.
“It is now clear that Trump’s policy is not about the trade deficit,” said Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd. in Hong Kong. “Security risks can be applied to every aspect in a bilateral relationship, investment restrictions in particular.”
The South China Morning Post reported that China has no plan to target US companies operating in the nation amid escalating trade tensions, but additional steps by the White House may change that assessment.
The Treasury Department is working on rules to block firms with at least 25 percent Chinese ownership from buying companies with “industrially significant technology,” the Wall Street Journal reported, citing people familiar with the plans. The final limit may end up lower than that, and the administration is also working on export controls to stop US technology being exported to China, the people said.
Stocks fell in Asia with US equity-index futures and the yen advanced as investors assessed prospects for continuing trade tensions.
Mnuchin has been working on the plans since as early as December, though he’s argued for taking a less aggressive approach, the people said.
In the end, he’s been persuaded by other members of the Cabinet and the president to use blunt tools to address growing national security risks from Chinese investments, the people said.
The Treasury chief has kept a low profile in recent weeks. People familiar with Mnuchin’s thinking said that after he lost an internal battle on how to handle the trade dispute with Beijing, he’s signaling his disagreement with the president’s approach through silence.