U.S. Prepares to Limit Chinese Investments in American Technology

The Trump Administration is planning to restrain Chinese investments in some U.S. industries, moving forward the current trade wars between the U.S., its G-7 allies, and China.

The Treasury Department has reportedly framed Chinese investors as threats to national security, according to six individuals familiar with the plan. This is a step that has rarely been taken and is considered to be one of the most significant legal measures in the U.S.

The measure would affect investments in technology, especially investments in transportation and robotics.

Proceeding in such a way could send a message to China that there is no longer room for negotiation or diplomacy. This measure also disregards previous advice from Treasury Secretary Steven Mnuchin, who explicitly supported the idea of negotiation with China.

Mnuchin said to Bloomberg News that the planned measures were “fake news,” going on to state that limitations on Chinese investments would not only affect China but any country that planned to buy technology from the U.S. in the near future.

Mnuchin’s statement has been proved false by previous notifications and public announcements. Actions against Chinese investment were explicitly indicated in a memorandum by President Trump with direct orders to Mnuchin, and the president has repeatedly asked for China to be sanctioned individually.

Trump stated during late March:

“the United States will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology.” Mnuchin had been working on a much more toned-down and less extreme version of this plan on late December of last year, and was forced to change his approach by the president and his officials.

The plan will soon be reviewed by the Committee on Foreign Investments in the U.S (CFIUS).

The Treasury Department may decide to delay the measure by creating two cases for the CFIUS to review, one specifically regarding China and one which is more general.

During a press briefing in Beijing on Monday, a spokesman for China’s Ministry of Commerce stated that the U.S. should treat commerce and trade between the two nations objectively and that China has already helped the U.S. by creating many jobs as well as increased tax revenue.

Peter Navarro, the Trump administration’s top economic adviser, released a document wherein he defended the upcoming measure. According to him, China’s attitude to international trade is “behavior [that] constitutes an economic aggression.” He added that “it is critical both for the interests of the United States as well as for the integrity and proper functioning of the global economy that the Chinese cease these kinds of behaviors.”

Several specialists have shown their concern in face of these plans, as these measures could end up hurting the stock market as well as many U.S. companies which have offices in China. Although the Chinese government has stated that it will not act against U.S. companies which are currently working in China, they are willing to retaliate if they find themselves threatened by the White House’s decisions. It is also believed that China and the EU are currently working together and are willing to “oppose protectionism and unilateralism”.

This is not the first response that the U.S.’ trade wars have stirred from world leaders.

German Chancellor Angela Merkel responded immediately to the disastrous outcome of the G-7 summit with regards to President Trump, calling his actions “depressing” and “sobering.” She also stated that European countries will counter the U.S.’ procedures and won’t allow the abuse by the Trump administration to continue. Working with China might be the first step in this process.