Donald Trump signs bill authorising tougher foreign investment scrutiny, weakened ZTE clampdown
US President Donald Trump has signed into law a new bill that authorises tougher regulations on foreign investments in the US " including deals from China.
The US$716 billion defence appropriations bill " which is named after Senator John S. McCain, who is battling a brain tumour " broadens the command of a cross-agency unit that reviews foreign investments in the US for national security concerns.
Under the new law, the entity, known as the Committee of Foreign Investment in the US, or CFIUS, will have the authority to review a broader set of mergers and assets acquisitions by foreign buyers.
The new bill "significantly expands CFIUS's jurisdictional ambit, and reflects the most comprehensive reform to CFIUS in its history", Mario Mancuso, a former senior member of George W. Bush's national security team and author of A Dealmaker's Guide to CFIUS, said on Monday.
In a Monday statement, Nancy McLernon, president and CEO of the organisation for International Investment (OFII), said that "FIRRMA does not radically change the scope of CFIUS to make it a tool for escalating trade disputes, coercing market reciprocity or imposing bygone industrial policy".
Instead, she said, "It keeps CFIUS squarely focused on protecting US national security from the deceitful efforts of our nation's adversaries."
This is the first reform that the review process has undergone in more than a decade. Although the bill did not single out any countries in particular, the lawmakers have not shied away from spelling out that China's acquisitions of US key technologies are their main concerns.
The current review process "has allowed bad actors to exploit gaps in our safeguards to gain a competitive edge on the United States", Senator John Cornyn said in a statement shortly after the bill was signed. "We can no longer allow dual-use military technology to be vacuumed up by countries like China."
Mancuso, who currently leads the CFIUS practice at law firm Kirkland & Ellis, said the new bill "will capture many investments that have not been historically subject to CFIUS's review", including venture capital and private equity deals, as in many cases it shifts the reviewer's focus "from whether a foreign investor could 'control' a US business to whether the foreign investor is 'non-passive'".
The Treasury Department will move to draft up the legislation before the new law goes into effect, a process that aims to provide guidance on terms including defining what "critical" technologies might be.
Analysts have expressed concern over a lack of clarity regarding what kinds of technology will raise red flags for the committee. That could lead to abuse, or paralyse companies trying to decide what technologies might be off-limit, they have said.
The defence bill also finalises weakened regulations that were originally intended to clamp down on Chinese telecoms company ZTE.
A proposal from the Senate would have effectively stopped ZTE from buying US
This article originally appeared on the South China Morning Post (SCMP).
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