US Congress considers new legislation to further restrict investment in Chinese tech sectors
- Hearing is held to build on President Joe Biden’s executive order banning US investments in four Chinese tech sectors
- Witnesses urge lawmakers to use existing authorities, including current export control lists, rather than create new mechanisms
Amid the growing tech war between the world’s two largest economies, the US Congress considered new ways on Tuesday to restrict US investment in China that involves sensitive technology.
The hearing by the House Financial Services subcommittee on national security, illicit finance and international financial institutions followed US President Joe Biden’s executive order in August prohibiting US private equity and venture capital investments from flowing into four Chinese tech sectors: artificial intelligence, quantum computing, semiconductors and microelectronics.
Biden’s order “took a step in the right direction but could be improved through legislative action, which is more permanent”, Representative Blaine Luetkemeyer, a Missouri Republican who chairs the subcommittee, said.
Representative Joyce Beatty, an Ohio Democrat, noted that “while there may be varying approaches, there is a strong bipartisan, bicameral support for outbound investment screening”.
The hearing – “Better Investment Barriers: Strengthening CCP Sanctions and Exploring Alternatives to Bureaucratic Regimes” – explored additional ideas for legislation to block US money from bolstering China’s technological and military sectors.
Three major bills have been introduced in Congress, including one by Representative Andy Barr, a Kentucky Republican, that would prohibit nearly all economic interactions with Chinese firms crucial to China’s defence and surveillance technology sectors.
Another House bill, introduced by Representatives Michael McCaul, Republican of Texas, and Gregory Meeks, a New York Democrat, seeks to build upon Biden’s order by expanding the restricted tech sectors to include hypersonics and high-performance computing.
And in the Senate, the Outbound Investment Transparency Act was introduced to require US companies to notify the Treasury Department before making investments in certain sectors.
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Witnesses at the Tuesday hearing urged lawmakers to leverage existing authorities, including the US government’s current export control lists, to avoid extra work creating new mechanisms.
“Establishing a unified definition of ‘critical technology’ and grounding that definition in well-defined export control lists such as the Commerce Control List and the United States Munitions List created clear, specific, updatable mechanisms for regulators to target specific threats,” said Richard Ashooh, vice-president of the Lam Research Corporation, a supplier to the semiconductor industry.
Thomas Feddo, founder of Rubicon Advisors, a national security consulting firm, said “creating a new outbound investment authority – whether a screening mechanism or a sector-like regime – is a mistake”.
“Since the start of the policy debate regarding the regulation of outbound investment, it has been my strongly held view that existing authorities provide the best means to address the asserted gap,” said Feddo. He proposed combining both House bills to construct a sanctions-based approach that applies existing export-control lists.
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The proposals follow other similar measures fortifying the legislative branch’s ability to assert some control over Biden’s China policies.
Otherwise criticised for a failure to produce legislation, for example, the current Congress still moved quickly last year to force the Biden administration to submit to its authority concerning economic ties with Taiwan.
The United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act was announced in June by the Senate Finance Committee and the House Ways and Means Committee; it passed the House the same month and the Senate in July.
Biden signed it weeks later, effectively giving Congress authority over agreements that the White House negotiates with Taipei.
