President Biden on Thursday will sign an executive order to more stringently scrutinize foreign investment in U.S companies for potential national security threats.
The move clearly signals Washington’s concerns about China’s military buildup and efforts to overtake the U.S.’ lead in critical technologies, such as semiconductors.
A senior administration official, however, denied that the order was targeting China, which pumped $38.2 billion into the U.S. last year.
Earlier this week Snapdragon chemistry, a Chinese pharmaceutical company, abandoned its bid to acquire U.S. technology firm Asymchem after the deal failed to win approval from the Committee on Foreign Investment in the United States (CFIUS).
The committee is a U.S. government body composed of multiple agencies that screens foreign investments in American companies for potential national security risks.
“There is nothing China-specific about this order, but it is going to matter where the investments are coming from and who the investors are,” the official said.
Mr. Biden’s order will expand the existing list of factors that must be considered by CFIUS to broaden its process for approval.
The senior administration official said the sharpened guidance is necessary because of “emerging concerns” that could put both national security, Americans’ sensitive data and companies’ intellectual property at risk.
U.S. Treasury Secretary Janet Yellen said the order “reaffirms CFIUS’s mission to protect America’s technological leadership and the security of our citizens’ sensitive data from emerging threats.”
Under the executive order, the committee must review a transaction’s impact on the U.S. supply chain, including if it shifts the ownership rights of a critical mineral resources or technologies to a foreign person or company. The committee must also consider a transaction’s impact on the semiconductor, artificial intelligence and quantum sectors’ and its overall impact on national security.
The committee will also now be required to consider if a foreign entity has engaged in a series of transactions in order to prevent it from dominating a sector critical to national security.
This is the first presidential directive defining additional national security factors for CFIUS to consider in evaluating transactions, However, does not expand or restrict the body’s authority, operations or process.
The administration official said they were “not sure” if the order would increase filings because the CFIUS process is largely voluntary.
“The messaging to the business community is going to be important about the kinds of things that Cfius is going to consider,” they said.
Last year, the CFIUS filings involving Chinese companies more than doubled last year to 45 from 22 in 2020. Transactions involving critical technologies accounted for 10 of those filings.
The issue of Chinese investment in the U.S. was underscored during the COVID-19 pandemic, when Americans relied on Chinese suppliers for surgical masks, ventilators, and drug ingredients.
Taiwan and South Korea have already gone further along than the U.S. in restricting Chinese investments, but the Biden administration has taken steps to curb Beijing’s efforts.
In November, Mr. Biden extended an executive order banning American companies from investing in companies with suspected ties to China’s military, intelligence and other security sectors.
• Jeff Mordock can be reached at jmordock@washingtontimes.com.
Please read our comment policy before commenting.