New investment law of the US discriminates against China

The Foreign Investment Risk Review Modernization Act, signed by US President Donald Trump on Aug 13 as part of the National Defense Authorization Act, is a hostile law against Chinese investment. Despite statements by some White House and Congressional leaders that FIRRMA does not target China specifically, the ulterior motive was evident at the Aug 23 roundtable on FIRRMA, where Trump and several lawmakers had a field day demonizing Chinese foreign direct investment. Every participant at the roundtable singled out China, mentioning it at least 15 times.

FIRRMA has expanded the power and scope of the Committee on Foreign Investment in the United States, an interagency that screens foreign FDI for national security concerns. The law makes CFIUS filing for certain categories of transactions mandatory, expands the areas of transactions subject to CFIUS jurisdiction, and enhances the CFIUS’s power to delay, block or unwind transactions deemed a threat to US national security interests.

Under FIRRMA, the CFIUS’s scrutiny also covers sales and leases of real estate in proximity to US government facilities and sales of US companies deemed “critical technology” and “critical infrastructure”. Such vague concepts leave much room for the opaque CFIUS to target Chinese investors.

While the law does not specify China in most provisions, Chinese FDI in the US is likely to face the toughest scrutiny by the CFIUS.

Yet for the Trump administration and some lawmakers, the Cold War may never end. Their unwarranted fears over Chinese FDI are in sharp contrast to the fervor of US governors and mayors who lead trade missions to China every year to woo Chinese investment and trade.