Trump's legislation plans to restrict Chinese investment in US firms

President Donald Trump on Wednesday opted for a less confrontational approach to limit Chinese investment in America, which he believes at times poses a serious challenge to national security.

Trump in a statement said the Foreign Investment Risk Review Modernisation Act (FIRRMA), will enhance American ability to protect the country from new and evolving threats posed by foreign investment while also sustaining the strong, open investment environment to which the US is committed, and which benefits its economy and people.

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.

Therefore, upon enactment of FIRRMA legislation, I will direct my administration to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies identified in the Section 301 investigation, Trump said.

At the same time, Trump warned that failure of the Congress to pass strong FIRRMA legislation that better protects the crown jewels of American technology and intellectual property from transfers and acquisitions that threaten national security and future economic prosperity, will lead his administration to deploy new tools, developed under existing authorities, globally.

To further ensure a robust defence of American technology and intellectual property, I have also directed the Secretary of Commerce to lead an examination of issues related to the transfer and export of critical technologies, he said.

Through this review, US will assess its export controls and make any modifications that may be needed to strengthen them to defend national security and technological leadership.

He also directed the secretary of state, the secretary of the treasury, the secretary of defence, and the US Trade Representative to engage with US allies and partners to support their efforts to combat harmful technology transfer and intellectual property theft.

A senior administration official said the president has decided to use the modernised Committee on Foreign Investment in the United States (CFIUS) as the best approach to protect critical technologies.

CFIUS is an extremely powerful tool to protect the United States' national security interests that could otherwise be put at risk by strategically motivated foreign investments. We've identified enhancements to CFIUS' authority that would make it more effective as a tool. We have been working very closely with Congress to address these concerns through the Foreign Investment Risk Review Modernisation Act," the official said.

The Act strengthens CFIUS' existing mechanism to combat threats stemming from strategically motivated foreign investment in the United States. We have been working for months with Congress on passage of FIRRMA. We now expect the Congress will pass a bipartisan bill that is strong, and will allow for comprehensive investment review to protect our national security, the official added.

The president, he said, has led on the issue of foreign competitors, principally from China, which is aggressively acquiring sensitive US technologies. Congress has responded with big, bipartisan majority supporting legislation to enhance US evaluation and control investments that threaten national security, the official noted.

As modernised by FIRRMA, CFIUS is the best approach to protect US technology, because it provides a very comprehensive and agile set of tools. CFIUS is able to respond appropriately to different threats on different technologies posed by different entities from different countries, he said.

FIRRMA will expand the scope of transactions reviewable by CFIUS to more effectively address national security concerns that fall outside the current scope of CFIUS review, he said.

Under FIRRMA, CFIUS can provide a comprehensive, customised response to differing threats, regardless of from where they arrive. The president can direct CFIUS to heighten scrutiny on sensitive technologies. After CFIUS' review, the president can block transactions found to pose a threat to the national security of the US, the official added.

A strong CFIUS enhanced by the Act will deter foreign investments that risk exposing sensitive US technology to theft or other forms that compromise it, said the official.