United States walks back China tech investment restrictions

Neal Hudson 
Nationwide UK house price indexannual change 2%year to date 2

"We are not singling out China", Treasury Secretary Steven Mnuchin told CNBC on Wednesday following the administration's announcement.

It comes as the United States and China both prepare to slap tariffs on $34bn worth of each others' goods.

U.S. President Donald Trump shifted away from a proposal to impose limits on Chinese investment in American technology companies and high-tech exports to China on Wednesday, choosing instead to call upon Congress to strengthen an existing review process. The measures passed with strong bipartisan support in both chambers.On Tuesday, the House bill was approved 400 to 2.

Meanwhile, trade tensions between the two countries remain high, with 25 per cent tariffs on US$34 billion worth of Chinese products due to come into force next week.

If Congress does not produce a compromise bill, Trump said his administration would "deploy new tools, developed under existing authorities" to protect US technology and intellectual property.

Since January, market volatility has become more commonplace, in part because of Trump's aggressive trade moves and the responses they elicit from major trading partners. The idea was to prevent state-owned or politically connected Chinese companies from buying advanced USA technology. "And we believe it will affect the competitiveness of the United States".

DeBusk said that trade tensions have driven the United States stock market down and said that Trump might be seeking a way to avoid "a potentially catastrophic" trade war with China. Trump has used the tool more frequently than past administrations. Trump, meanwhile, is directing the Commerce Department to review the Export Control Act with an eye on recommending ways to revamp the law, which is designed, in part, to limit access to the most sensitive USA technology and weapons for national security purposes.

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The House approved a bill this week to strengthen the CFIUS law, and a joint House-Senate conference committee on defense policy bill is expected to take up the matter as well. When Gary Cohn, the White House's top economic adviser, resigned earlier this year, Trump increasingly solicited advice from Navarro, a staunch protectionist.

The White House announced on Wednesday that it will not limit Chinese investment in USA companies beyond what a current bill in Congress already promises to do. Rather they say it's a process that is well understood by the USA business community and one that maintains an open investment climate. "It's confused the Chinese about what the US really wants".

The Treasury-led panel reviews proposed acquisitions of USA assets by foreign investors, which the president can veto.

After reviewing the current versions of FIRRMA with my team of advisors and after discussing them with many members of Congress I have concluded that such legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity, he said.

It can make recommendations to the president, who can stop a deal from going though, although in practice a negative CFIUS finding alone is sometimes enough to kill off a deal.

"Mnuchin, it seems like he is prevailing on a lot of these disputes", said Steve Moore, who was a top economic adviser to Trump during the campaign.

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