Trump signals shift from imposing China investment limits

Hugh Fox
June 30, 2018

Asked about the administration's shift, Mnuchin told reporters, "It is not a question of whether we are focusing on China or we are not focusing on China" but an issue of using all means to address trade disputes with Beijing.

The White House officials said the administration does not favor one bill over the other but believes Congress can deliver final legislation that is "strong and responsive" in protecting sensitive USA technology.

"We are not, on a wholesale basis, discriminating against China as part of a negotiation", Mnuchin said on CNBC on Wednesday.

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 after U.S. complaints that China has unfairly acquired American intellectual property through joint venture requirements, unfair licensing and strategic acquisitions of USA tech firms.

"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.

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USA stock futures surged on the news.

President Trump's chief economic adviser Larry Kudlow, who returned to the White House two weeks after being hospitalized for a mild heart attack, is interviewing candidates for two positions on the National Economic Council (NEC) that will be vacated in July.

CFIUS has already been more aggressive under Trump, especially on China.

Instead of immediate bans on Chinese investment created to protect sensitive US technology industries, the administration said it would work with Congress to pass a bill that will provide "enhancements" to the foreign investment reviews under the existing Committee on Foreign Investment in the United States. That announcement said that controls would be announced by June 30 and would "be implemented shortly thereafter".

The US technology could be protected through the committee, he said. The idea was to prevent state-owned or politically connected Chinese companies from buying advanced USA technology.

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Trump's choice shows that he is favoring a more measured strategy that requires coordination with Congress, rather than working exclusively through the executive branch. Trump has used the tool more frequently than past administrations.

CFIUS legislation passed in the House would expand investigations by the panel to include minority investments in "critical technology" or "critical infrastructure" and joint ventures where technology companies contribute intellectual property.

Commerce ministry's Gao also said cooperation between China and Europe would bring a "warm current" to the global economy as both parties strongly opposes unilateralism and protectionism.

Mnuchin said Wednesday that the White House expects lawmakers to act quickly to protect USA technology. Trump, meanwhile, is directing the Commerce Department to review the Export Control Act with an eye on recommending ways to revamp the law, which is designed, in part, to limit access to the most sensitive USA technology and weapons for national security purposes.

A Commerce Department spokesman did not respond to Reuters' requests for comment on the study. While the House and Senate companion bills on CFIUS modernization need to be worked out, there is interest from Senator John Cornyn, the No. 2 Republican, in creating a list of countries of special concern.

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