The White House is still working on an executive order for restricting U.S. investments in China that could imperil national security. But some House Republicans are already threatening to try and stop it, warning an overly broad approach could cause chaos for investors trying to follow the law.
Rep. Andy Barr, R-Ky. said the House Financial Services Committee, which he sits on, would look to “block” the White House executive order if it resembles legislation offered last Congress by Sens. John Cornyn, R-Texas and Bob Casey, D-Pa., which would set up a screening process for U.S. investments into Chinese technology sectors. Instead, he said he and others on the panel want to take a “precision” approach to blocking sensitive outbound investments that sets clearer rules in advance for private sector players weighing deals.
“Our default should always be that we don’t counter China by becoming more like China,” Barr, who said he’s been in touch with leading business figures like JPMorgan Chase CEO Jamie Dimon and BlackRock CEO Larry Fink, told Semafor. “I think decoupling across the board is a mistake.”
To be sure, the White House also isn’t talking about decoupling. Treasury Secretary Janet Yellen said at a hearing this week decoupling from China would be “disastrous.” But the discussion of outbound investment is starting to generate some friction between the major players who will determine the policy.
House Financial Services Committee Chairman Patrick McHenry, R-N.C. told Semafor that he has raised concerns with the White House and that any solution needed to reflect U.S. values of “open society, of rule of law, and speech rights.”
“Anything that goes beyond an entity’s or an individual’s designation, I think, is not in keeping with how we’ve done this over the last century,” McHenry said.
He added the committee would “keep all options on the table” when asked about potential plans to disrupt the executive order. A letter he sent to House appropriators last month suggested not funding the outbound screening program.
There is actually a fair amount of agreement in Washington on the general premise behind the White House executive order: restricting investments in China that impact U.S. national security.
The disagreement is over how policymakers accomplish that goal, and how far they go. Barr asked Yellen during the same hearing earlier this week to agree to pause work on the executive order until Congress acts (she declined to do so, saying it would be up to President Biden).
The order could come as soon as this summer, sources said, but it has faced repeat delays. Administration officials have said it would be “targeted” and “tailored” to address certain types of capital flows in technologies that present a national security risk because of their dual use in commercial and military means, like advanced semiconductors, artificial intelligence, and quantum computing.
“I think it would need to be as narrow as possible and as clear as possible so that industry could understand exactly what is included and what is not,” Grant Harris, an assistant secretary at the Commerce Department, recently said at an event hosted by the Center for a New American Security.
The White House is talking about creating a new tool to screen these transactions and has voiced support for similar bipartisan efforts in Congress. Sens. Casey and Cornyn haven’t reintroduced their legislation, though it’s expected to be rolled into a big China bill prioritized by Senate Majority Leader Chuck Schumer. The House version, reintroduced last month, would apply the screening process to areas ranging from AI and quantum computing to critical minerals and pharmaceutical ingredients.
Barr, who also sits on the House select committee on China, thinks the problem can be solved by using already existing powers at the Treasury Department to impose blocking sanctions on companies tied to China’s military and government surveillance, which he argued would give the most clarity to investors and also impact companies outside the U.S. His proposal is among a group that the House select committee on China is looking at to “counter the flow of tech and capital to malign PRC entities,” a committee aide said.
Room for Disagreement
Congressional gridlock might make it impossible to pass any bipartisan compromise on restricting investment in China.
McHenry, as the chair of the powerful Financial Services Committee, will be the ultimate decider of whether and what kind of legislation can pass the GOP-controlled House. He has sounded skeptical of the White House’s efforts and the idea of screening outbound investments altogether, and instead suggested relying on existing export controls and sanctions.
“We’re looking at legislation for the future but I don’t have any announcements there,” he told Semafor.
The View From Europe
Business leaders in Europe are closely watching a forthcoming blueprint on economic security that European Commission President Ursula von der Leyen will unveil next week on June 20. It is expected to address outbound investment screening for the member states.