Confronting China through CFIUS Reform: Improved, But Still Problematic



Martin Chorzempa | Peterson Institute for International Economics

In the last quarter century of China’s rise, few issues have stirred more anxiety in the United States than China’s increasing technological prowess and the evidence that state-backed strategic investments abroad and the exploitation or even theft of American technology by Chinese entities—including its government, private firms, and state-owned companies—are behind it. Republicans and Democrats in Congress have been deeply concerned with the issue, long before President Trump focused on it, and aimed last year to address it with new legislation. This summer, Congress appears poised to enact a major change to curb Chinese investment in the United States—and also to limit the ability of US companies to invest in China if such activities risk transferring sensitive technologies to their Chinese partners.

Lawmakers say that their approach, embodied in the Foreign Investment Risk Review Modernization Act (FIRRMA), has a good chance of passing this year. The legislation would strengthen the power of the Committee on Foreign Investment in the United States (CFIUS), the interagency executive branch body that reviews a foreign investment if it “threatens to impair the national security of the United States.” Though FIRRMA is clearly motivated by concerns about China, its passage would affect investment with entities from a broad swath of countries, including US allies. More broadly, the legislation would set up an interagency group to monitor the transfer of “foundational” technologies and products—American companies’ “crown jewels”—to entities from China and other countries considered potential security risks

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