US President Donald Trump on Wednesday said he supported tougher restrictions on foreign investment in sensitive technology, as well as export controls on those goods, but he stopped short of imposing specific restrictions on China.
Following a report that raised "very serious issues" on China's trade and investment practices, Trump decided a plan in Congress to enhance the powers of the so-called Committee on Foreign Investment in the United States (CFIUS) was "the best approach to protect critical technology." In a statement, Trump said that if Congress fails to pass strong enough legislation to protect "the crown jewels of American technology and intellectual property" then he will take further action.
After a year-long investigation into China's trade policies, the White House on May 29 said it planned to announce "specific investment restrictions and enhanced export controls" by June 30 targeting China's efforts to acquire "industrially significant technology." However, Trump backed away from singling out China and instead supported broader measures that would apply to any country.
The House of Representatives on Tuesday approved a bill to boost the authority of CFIUS, an interagency body that reviews potential foreign investment and is led by Treasury Secretary Steven Mnuchin, and to broaden the types of deals subject to oversight. The Senate Banking Committee also approved a version of the reform, so the two chambers will have to reconcile them into a single bill for Trump to sign.
Trump said the legislation would offer "additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity." Even the hint of a possible CFIUS review can kill a potential investment and the committee has blocked Chinese investment in semiconductors and the oil industry but also has targeted Russian nuclear investment, and a Dubai takeover of a US port operator.
According to the Rhodium Group, a research firm, Chinese investment in the United States fell 35 percent in 2017 from the record $45.6 billion in 2016, and has slowed to a trickle, just $1.4 billion in the first quarter of this year.
Trump also instructed the Commerce Department to look at new export controls to "further ensure a robust defense of American technology and intellectual property."
Leading agencies will work with US allies "to combat harmful technology transfer and intellectual property theft," Trump said. The White House may have been prompted to step back from tough restrictions on China after stock markets dropped sharply and as experts warned that strong action against Beijing could open US firms up to severe retaliation.
Still, Treasury Secretary Steven Mnuchin dismissed the idea the administration was going soft on China. "For those who want to say it's us being weak on China, the answer is no," he said. "But on the other hand, this is not intended to target China. The president felt very strongly that we should be protecting technology no matter who we are dealing with."
Even so, the measures were prompted by US complaints over Chinese policies that Washington said either forced companies to relinquish key technology or steal it outright.
Trump announced 25 percent import tariffs on hundreds of Chinese products to pressure the country to alter its practices. Those tariffs are due to take effect July 6.
US officials have highlighted Beijing's "Made in China 2025" industrial development plan as a source of concern, since they say it is a map for dominating significant high-tech industries from space to telecommunications, robotics, and electric cars.