US Should Consider Barring Some Chinese FDI, Panel Told

The U.S. government should explore the possibility of prohibiting inbound Chinese foreign direct investment in a few sensitive high-sectors to ease the workload burden on the Committee on Foreign Investment in the U.S., a congressionally mandated commission heard last week.

Such a change would spare CFIUS from having to review cases it will likely reject, such as Chinese investment in semiconductors, and would allow the committee to focus its limited resources on cases that are less clear-cut, such as Middle Eastern investment, said Peter Harrell, a nonresident scholar at the Carnegie Endowment for International Peace and a former National Security Council official in the Biden administration.

While figuring out how to define and enforce such a ban could get complicated, "I do think that's something that's worth considering," Harrell testified before the U.S.-China Economic and Security Review Commission.

The approach would be similar to the one the Biden administration is proposing for outbound investment, Harrell said. The Treasury Department is drafting a rule that would prohibit U.S. investment in entities operating in China’s artificial intelligence, quantum information technology and semiconductor sectors (see 2308090066).