US weighs emergency powers to curb Chinese investments

Trade tensions with US testing resolve of Chinese consumers

WASHINGTON, April 21, (RTRS): The US Treasury is considering ways to restrict sensitive Chinese investments in the United States by invoking an emergency powers law and bringing forward some security review reforms for corporate acquisitions, a senior Treasury official said on Thursday.

The efforts were being examined as part of the Trump administration’s “Section 301” intellectual property remedies, which include Chinaspecific investment restrictions, Assistant Secretary for International Markets and Investment Heath Tarbert told an Institute of International Finance Forum.

Asked about reports the Treasury may bring forward parts of a bill to modernize security reviews by the Committee on Foreign Investment in the United States and use the International Emergency Economic Powers Act, Tarbert said a special Treasury office devoted to the China restrictions was considering such avenues.

“We have separate offices in Treasury which are considering those two issues distinctly,” Tarbert said.

A Treasury office that manages CFIUS is separate from the office working on China investment restrictions, he said.

Speaking in Beijing on Friday, Foreign Ministry spokeswoman Hua Chunying said the mooted move was another example of US “hegemonic attitudes”.

“On the one hand the US wants us to open our markets further yet on the other hand it sets restrictions for Chinese trade and investment in the name of national security,” Hua said.

The Treasury investment restrictions are aimed partly at pressuring China to lift requirements for foreign companies to form joint ventures with local firms that lead to technology transfers, a policy the administration deems unfair when the United States has no such restrictions on Chinese firms.

In a major policy shift, China said on Tuesday it would scrap a 50 percent limit on foreign ownership of autos by 2022.

Tarbert said the Treasury was committed to working with Congress to pass the CFIUS legislation, known as the Foreign Investment Risk Review Modernization Act, or FIRRMA.

“We think CFIUS modernization is something that needs to be done via statute and should be done in a thoughtful way,” he said.

A congressional aide told Reuters it may be possible to accelerate parts of the CFIUS reform bill with an executive order to fill gaps until the legislation is passed by Congress later this year.

Invoking the 1977 emergency economic powers law would give President Donald Trump broad authority to impose tighter restrictions on Chinese investment in sensitive sectors, by declaring a national emergency related to such investments.

The law was widely used after the Sept 11 attacks in 2001 to block the assets of militant organizations and other illicit finance networks.

The CFIUS reform legislation is a work in progress. Tarbert said one of its aims was to expand reviews of sensitive transactions that do not involve a full transfer of control, including offshore joint ventures that could compromise national security through technology transfers.

Meanwhile, Guo Qingshan delights in riding his 400,000 yuan ($63,839) Harley-Davidson motorbike around Beijing’s suburbs.

“I love the sound of the engine and the muscle of the motor. When I ride it, I feel free and proud,” the 32-yearold said. However, Guo has his limits. Deteriorating trade ties between the United States and China could mean American imports, including HarleyDavidson motorcycles, could be much more expensive in the future as the two countries trade tit-for-tat tax hikes on each other’s goods.

Since entering office, US President Donald Trump has taken a hard line on trade. Last month, the world’s biggest economy said it would impose tariffs on steel and aluminium imports from most trading partners, including China.

In response, China slapped additional import taxes on 128 US products, including frozen pork and wine. Soon after, it said it was considering additional duties on 106 US imports, though it has not said when the new tariffs could kick in.

US goods in the crossfire range from soybeans, cotton, autos and auto parts, to whiskey and particular varieties of wheat, with their value totalling $50 billion.

The tensions are already affecting consumers in China.