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Trump softens threat of new curbs on Chinese investment in United States firms

28 June 2018
Trump softens threat of new curbs on Chinese investment in United States firms

The administration decided not to employ the International Emergency Economic Powers Act of 1977 that would give the president broad authority to curb Chinese investments in the country.

President Donald Trump opted instead to rely on legislation to enhance the powers of the committee known as the Committee on Foreign Investment in the United States or CFIUS, which reviews proposed acquisitions of USA assets by foreign investors.

Treasury Secretary Steven Mnuchin says the US economy is strong due to President Donald Trump's tax plan and deregulation initiatives. "But we are not going to, on a wholesale basis, discriminate against China as part of a negotiation".

"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. After CFIUS' review, the president can block transactions found to pose a threat to the national security of the U.S., the official added.

The decision marks a somewhat softer approach to curbing Chinese investments pushed by Treasury Secretary Steven Mnuchin, while other senior Trump advisers had argued for harsher, China-specific curbs invoking an emergency economic powers.

A senior administration official said the president has made a decision to use the modernised Committee on Foreign Investment in the United States (CFIUS) as the best approach to protect critical technologies.

So what changed to get the White House to announce this three days early? The committee's powers are likely to be strengthened through legislation that is now pending in Congress.

The president had called for wide-ranging restrictions on Chinese investment in US companies, along with tariffs, as a way to prevent China from acquiring American-made technology. The president has already imposed tariffs on steel and aluminum, and on billions of dollars worth of goods from China.

Mnuchin said the new CFIUS legislation, passed 400-2 in the House of Representatives on Tuesday, would broaden the types of transactions that could be reviewed by the panel on national security grounds, including minority stakes, joint ventures and property purchases near USA military bases.

Trump also said that he has directed Commerce Secretary Wilbur Ross to examine USA export controls and recommend modifications that may be needed "to defend our national security and technological leadership". "I don't think this is a question of weaker or stronger".

"CFIUS is an extremely powerful tool to protect the United States' national security interests that could otherwise be put at risk by strategically motivated foreign investments".

In its current form, CFIUS had already become more active in blocking proposed U.S. investments by Chinese companies over the past year.