The US has tightened scrutiny procedures for Chinese and other foreign investors that seek to gain a foothold in high-tech American businesses on grounds of national security, even as the two sides resumed deputy-level trade talks on Thursday to reach an agreement soon.
Ahead of the meeting, US president Donald Trump has suggested that a trade deal will be reached soon. China is apparently anxious to reach an agreement before the elections in 2020 because Chinese officials understand the US will strike a harder deal after the election.
“If it’s after the election, it will be a deal like you’ve never seen, it’ll be the greatest deal ever and China knows that," Trump told reporters in Washington on 17 September.
“They think I’m going to win, China thinks I’m going to win so easily and they’re concerned because I told them, if it is after the election it’s going to be far worse than what it is right now. I told them that. Would they like to see somebody else win? Absolutely," Trump claimed, according to a report in the Washington Trade Daily on 18 September.
Despite the cautious moves by both sides towards an agreement on the trade front, the US has further tightened the rules governing entry of foreign investors into American businesses through takeovers and equity participation in sensitive technology and high-tech areas on national security considerations. The US move was directed primarily at Chinese investors who had earlier invested in several US startups, several analysts said.
On Tuesday, US treasury department officials “provided a first glimpse of how they would implement Congress’s order last year to expand the scope of national-security reviews of foreign investment deals, including those involving satellites, oil refineries, financial-market systems and drinking water utilities," according to a report in The Wall Street Journal.
“Today’s proposed regulations will provide clarity and certainty to investors regarding CFIUS’s (Committee on Foreign Investments in US) enhanced authorities to address national security risks that arise from certain foreign investments," US treasury secretary Steven T. Mnuchin said.
The CFIUS regulates foreigners, or aliens in the American lingo, from acquiring controlling stakes in areas involving “critical technology" with national security implications.