‘We can’t let people steal’: Donald Trump talks of blocking Chinese tech investments

US President Donald Trump hinted on Tuesday that he would restrict Chinese investments in the US through a government agency that has already derailed several proposed acquisitions over the past year.

Speaking at a lunch with lawmakers in Washington, Trump said the Committee on Foreign Investment in the United States (CFIUS) would help counter the acquisition of US companies that develop advanced technologies.

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“We have the greatest technology in the world. People copy it and they steal it, but we have the great scientists, we have the great brains, and we have to protect that, and we’re going to protect it,” Trump said. “And that’s what we were doing. And that can be done through CFIUS. We have a lot of things we can do it through. And we’re working that out.”

“We want to have our jewels. Those are our great jewels. That’s like United States Steel from 70 years ago, these companies. We have to protect these companies. We can’t let people steal that technology.”

CFIUS is on course to get a wider mandate and sharper teeth as a bipartisan group of lawmakers is pushing the Foreign Investment Risk Review Modernisation Act (FIRRMA), through Congress with broad support from both parties.

FIRRMA would require more companies that invest in, or form joint ventures with, certain US businesses not only to submit to a review by CFIUS, but to pay the agency at least US$300,000 for the work. The equity threshold triggering a mandatory CFIUS review would drop to as low as 10 per cent for some transactions, from 50 per cent now.

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FIRRMA was added to the National Defence Authorisation Act – a defence spending bill passed by the Senate last week.

While CFIUS does not expressly target companies from particular countries, Senator John Cornyn, a Republican co-sponsor of FIRRMA, has said repeatedly that Chinese acquisitions of US technology make the bill’s passage necessary.

FIRRMA “would represent the most comprehensive reform of the foreign investment review process under CFIUS since the Foreign Investment and National Security Act (FINSA) was enacted in 2007,” according to a Congressional Research Service report published last week.

“Changes proposed to the current FINSA law could recast the law’s generally defensive approach that largely focuses its security reviews and investigations on the potential impact of individual investments on national security to a more assertive role that emphasises US economic as well as national security interests,” the report said.

Trump is using punitive tariffs and threats to limit Chinese investment in the US to force Beijing to give foreign companies more access to Chinese markets. He also wants a relaxation of rules that require foreign companies operating in China to transfer proprietary technology to local joint venture partners.

Confusion over his next moves caused US markets to swoon on Monday. The Dow Jones Industrial Average plummeted more than 400 points on Monday after Treasury Secretary Steven Mnuchin’s comments that investment restrictions would not be limited to China, “but to all countries that are trying to steal our technology”.

Trump announced on June 8 that a 25 per cent tariff on US$50 billion worth of Chinese imports would go into effect next week, prompting Beijing to take equivalent action on US imports. Trump has threatened to widen the scope of his punitive moves to target as much as US$450 billion worth of Chinese products.

The next stage will be an announcement, expected from the Trump administration by the end of this week, with specifics on how it will restrict Chinese investment in the US tech industry.

Signalling its intentions, the White House last week released a 35-page report titled “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World”.

The report accused Beijing of “physical theft, cyber-enabled espionage and theft, evasion of US export control laws, and counterfeiting and piracy” in a state-sponsored effort to give its companies an edge against foreign competitors.

The government’s methods include “coercive and intrusive regulatory gambits to force technology transfer from foreign companies, typically in exchange for limited access to the Chinese market” and “economic coercion through export restraints on critical raw materials and monopsony purchasing power”.

CFIUS has blocked several proposed Chinese acquisitions of US companies in the past year, including Chinese private equity firm Canyon Bridge Capital Partners’ proposal to buy US chip maker Lattice Semiconductor Corp for US$1.3 billion and Ant Financial’s attempt to buy MoneyGram International for US$1.2 billion.

Ant Financial is an affiliate of Alibaba Group, which owns the South China Morning Post.