China hawks who want to restrict how U.S. investors can send money and share industrial know-how with Chinese companies in sensitive and advanced technology fields see signs that the Biden administration and Capitol Hill's progress is stalling. However, I am not optimistic that serious action will take place this year.
These signs include the impending repeal of one of the strongest threats to legislative efforts to restrict foreign investment in China. In December, House Financial Services Committee Chairman Patrick T. McHenry, RN. It blocked efforts to include a passage clause. Under the National Defense Authorization Act, he said he intends to leave the House at the end of this session.
And the Treasury Department is expected to issue regulations this summer implementing President Joe Biden's August 2023 executive order. The order prohibits private equity and venture capital investments from entering China's sensitive technology areas, such as artificial intelligence, quantum computing, semiconductors and microelectronics, if it would help the Chinese government acquire new military capabilities. . The administration says the theory behind the order is to build “high fences” around particularly important areas of U.S. investment and technology, but otherwise allow U.S.-China trade to continue. It states that there is.
Derek Scissors, a senior fellow at the American Enterprise Institute, said that even though the entire U.S. portfolio of investments is in China, there is a lack of political will on Capitol Hill and within the administration. It said efforts to bring more transparency and oversight to China's investments in key sectors were being hampered. Asia's giant companies are in decline as the outlook for the world's second-largest economy worsens.
“The administration used the phrase 'small garden and high fence,' but it's a fence with gates and lots of holes,” Scissors said, referring to the lack of enforcement on sensitive U.S. exports and investments. ,Stated. He accused Treasury Secretary Janet L. Yellen of “delaying” new regulations to implement last summer's executive order, even though the administration first raised the issue in summer 2021.
Even as lawmakers pay increased attention to the risks of Chinese technology competition, they are struggling to find ways to prevent U.S. funds from contributing to Beijing's efforts. The U.S. is currently trying to put limits in place, but advances in technology can often outpace government regulations. The lines between civilian and military technology are also blurred, potentially diverting international investment flows and making it difficult to understand what is benefiting China.
Rep. Mike Gallagher (R-Wis.), chairman of the House Select Committee on the Chinese Communist Party, outlined some of the challenges in a letter to Secretary of Commerce Gina M. Raimondo this month. He expressed concern that UAE artificial intelligence group 42 Holdings has ties to Chinese military companies. The letter said several U.S. companies have extensive commercial relationships with Group 42.
House Foreign Affairs Committee Chairman Michael McCaul (R-Texas) led a hearing this month examining U.S. investments in China.
“We can limit China's access to critical U.S. technology through export controls, but we can stop large investors from using their capital, know-how, and networks to help build advanced technology companies in China. Unfortunately, US funding is accelerating this problem. [Chinese Communist Party] It’s a war machine and a surveillance state,” he said.
One of the challenges is obtaining adequate data on the extent of the problem. Scissors said there is no sector-by-sector breakdown of portfolio investments in China, and the data that does exist is unreliable.
Democrats and Republicans in both chambers say they will continue to push for legislation that could review and restrict the flow of American investment and industrial expertise into sensitive Chinese sectors. But last November, McHenry and his allies blocked the provision from Sens. John Cornyn (R-Texas) and Bob Casey (D-Pa.) from being included in the bill. It's unclear whether it will run into the same hurdles as the moon. The last resort of defense policy.
Last summer, the Senate voted 91 votes to amend Mr. Cornyn and Mr. Casey's annual defense policy measure, based on a bill that would require prior notification to the Treasury Department of investments made by countries in sensitive technology areas such as quantum computing and artificial intelligence. It was adopted in 6. There were concerns about this, but it was dropped during conference negotiations.
McHenry said limiting U.S. financial investment in China could help U.S. executives and business leaders vis-à-vis major Chinese companies in encouraging compliance with Western standards and U.S. law. He said his influence would be reduced.
Looking to the future
Mr. McCaul is touting a bill he and Rep. Gregory W. Meeks of New York, the ranking member of the House Foreign Affairs Committee, that the committee passed unanimously last November. Their bill would require the government to identify categories of technologies and products in the semiconductor and microelectronics fields. Artificial intelligence; quantum information science and technology. Hypersonic speed. High-performance computing and supercomputing that could pose a threat to U.S. national security. The bill would require U.S. investors in these sectors to notify the government if their investments could be developed or acquired by China, Russia, North Korea, or Iran.
Rep. Andy Barr (R-Ky.), chairman of the House Financial Services Committee, was called by House Minority Leader Steve Scalise (R-Louisiana) late last year to find a consensus among House Republicans on how to approach regulation. He said he is a member of the current working group. Investment in China. Other members of the group include McHenry, McCall, and Gallagher.
Mr. Barr was one of the leaders of the House Financial Services subcommittee who joined Mr. McHenry in a letter objecting to provisions in the defense policy bill last fall. The letter proposed a sanctions approach.
At a Senate Banking hearing earlier this month, Emily Kilcrease, director of the Energy, Economics, and Security Program at the Center for a New American Security think tank, said efforts to limit foreign investment in China would require transparent investment in China. He said that more is needed than just becoming While the US dollar is flowing, we also understand how America's specialized industrial know-how can be used to benefit the Chinese government, to the detriment of US national security.
She cited the complex supply chain management involved in semiconductor factories. “It requires a skilled workforce, and it requires the recruitment and retention of such a skilled workforce. That includes a commercial strategy that can survive even in harsh environments. “It's just this kind of know-how that comes with it, and we don't have the tools to capture it right now,” she said.
Caitlin Reilly contributed to this report.
