House Committee Urges Yellen to Hasten Investment Restrictions on CCP-linked Firms
The House Select Committee Urges Treasury Secretary to Implement Investment Restrictions in China
The House Select Committee on the Chinese Communist Party (CCP) has called on Treasury Secretary Janet Yellen to take action on President Joe Biden’s executive order regarding outbound U.S. investment restrictions in key technology areas in China.
“As Treasury deliberates on the definitions and scope to be issued in these guidelines, the Chinese Communist Party (CCP) is developing advanced technologies, with the help of American capital and know-how,” they said in the letter, urging Ms. Yellen to issue rules and guidelines so that U.S. firms can be aware of what investment restrictions to avoid.
In August, President Biden signed an executive order banning outbound American investments in key technologies that “significantly advance the military, intelligence, surveillance, or cyber-enabled capabilities of countries of concern.”
The committee recommended the Treasury Department to “adopt a broad definition” of three restricted sectors as the CCP uses an “expansive concept of national security” and “blurs the line between national security and normal commercial matters,” as well as evades narrowly defined restrictions. The committee noted that it does not recommend exceptions as they can weaken the effectiveness of the measures. It also seeks maximum penalties for those who violate the regulations.
Cooperation with Allies and Partners
In addition, the committee suggested that the United States cooperate with allies and partners to limit the CCP’s military modernization efforts.
It also noted that the regulations should not just apply to active investment. Still, passive investments via public markets, such as mutual funds or index funds, should be taken into consideration, as many U.S. investments in Chinese tech firms are made via those types of public funds.
Preventing Investment in the Chinese Military
The committee has repeatedly sounded the alarm on U.S. firms investing in China’s technology firms that strengthen the CCP’s military.
In July, the panel launched a probe into four venture capital firms, accusing them of strengthening the Chinese military via their investment.
“It is likewise using advancements in quantum computing and semiconductor manufacturing to support the People’s Liberation Army (PLA).”
The letters also request that the leadership of each of the funds answer a series of questions regarding their investments in Chinese companies, including what companies they are investing in, the dollar amounts of each investment, their policies concerning investments in such companies, and what course of action the funds would take if companies they invested in were sanctioned by the U.S. government.
“American venture capital and private equity investments in [Chinese] AI, quantum, and semiconductor companies directly contribute to the PRC’s human rights abuses, military modernization, expansion of authoritarianism around the globe, and the [CCP’s] overall effort to supplant U.S. technological leadership,” the letter said, referring to the country’s official name, the People’s Republic of China.
Passive Investment
As mentioned in the letter to Ms. Yellen, the panel wants to address passive investment flow into Chinese firms.
In July, the committee opened an investigation into asset management firm BlackRock and index provider MSCI, alleging that these firms facilitated passive investments into blacklisted Chinese companies.
The investigation revealed that BlackRock had invested over $429 million from five funds in such companies. The company manages over $9 trillion in assets and handles investments for millions of Americans.
The committee expands its focus by examining asset managers and index compilers like BlackRock and MSCI, even though they may not directly involve Chinese companies in their portfolios or indexes. However, according to the panel, their role in directing substantial amounts of Americans’ retirement savings into these companies is considered crucial and a cause for concern.
The Epoch Times has reached out to the Treasury Department for comment.
Andrew Thornebrooke contributed to this report.
What potential risks are associated with U.S. investments in Chinese technology companies and why is vigilance and stricter regulations necessary to prevent unintended support of the CCP’s military goals
Ple’s Liberation Army’s strategic goals,” the committee stated.
The committee’s push for investment restrictions stems from concerns about the CCP’s military modernization efforts and its threats to U.S. national security.
By imposing investment restrictions, the U.S. aims to prevent American capital and technology from being used to advance China’s military capabilities. This aligns with President Biden’s goal of competing with China from a position of strength and protecting U.S. technological leadership.
The committee’s recommendation for a broad definition of restricted sectors reflects the need to encompass all areas that may contribute to the CCP’s military advancements. The CCP’s expansive concept of national security necessitates a comprehensive approach to investment restrictions to ensure that no loopholes are exploited.
Cooperation with allies and partners is crucial in addressing the challenge posed by the CCP’s military modernization. By working together, the U.S. and its allies can enhance the effectiveness of investment restrictions and prevent their circumvention.
Furthermore, the committee’s emphasis on considering passive investments through public markets recognizes the indirect channels through which American capital flows into Chinese tech firms. Restricting only active investments would overlook a significant portion of U.S. funding that indirectly supports the CCP’s military endeavors.
In investigating venture capital firms accused of aiding the Chinese military, the committee highlights the potential risks associated with U.S. investments in Chinese technology companies. By exposing these instances, the committee emphasizes the need for vigilance and stricter regulations to prevent further unintended support of the CCP’s military goals.
The House Select Committee’s letter to Treasury Secretary Janet Yellen serves as a call to action in implementing investment restrictions in China. It emphasizes the urgency of defining and issuing guidelines that clearly outline the sectors and activities subject to restrictions. By doing so, U.S. firms can make informed decisions and prevent inadvertent support of the CCP’s military advancements.
As the U.S. continues to navigate its complex relationship with China, implementing investment restrictions is an essential step in safeguarding national security interests. By curbing the flow of American capital and know-how to China’s military sector, the U.S. aims to mitigate the risks posed by the CCP’s technological advancements. Through proactive measures and international cooperation, the U.S. can maintain its competitive edge and protect its strategic interests in the face of evolving global challenges.
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