Key Republican urges Biden to set broad restrictions on U.S. investments in China

By David Shepardson

WASHINGTON (Reuters) – The chair of a U.S. House committee on Thursday urged President Joe Biden to adopt expansive restrictions on outbound U.S. investment in China especially in key sectors likely to harm U.S. national security.

Representative Mike Gallagher, a Republican who heads the select committee on China, wants the Biden administration to “include both private and public market investments flowing to China in new restrictions.”

The letter is the latest push by lawmakers in both parties for Biden to finalize tough restrictions on U.S. investments in China. Biden is likely to adopt new outbound investment restrictions on China in the coming weeks, sources have told Reuters.

For more than two years, U.S. lawmakers have been pushing the Biden administration to boost oversight of investments by U.S. companies and individuals in China.

Gallagher said U.S. investment in China “poses a significant national security risk, exposes Americans to material and systemic financial risks, and makes them complicit – often unwittingly – in human rights abuses.”

Reuters reported in July the Biden administration was finalizing an executive order that would also restrict certain investments in sectors including advanced semiconductors, quantum computing and artificial intelligence.

Gallagher said investments in key sectors relevant to national security and central to China’a technological rise should be restricted and ensure U.S. capital “does not support the ongoing People’s Liberation Army (PLA) buildup, facilitate the CCP’s human rights abuses or techno-totalitarian surveillance system, or deepen our dependency on (China) in critical supply chains.”

The White House declined to comment.

Chinese Embassy in Washington spokesperson Liu Pengyu said the United States “habitually politicizes technology and trade issues and uses them as a tool and weapon in the name of national security … We will closely follow the developments and firmly safeguard our rights and interests.”

Gallagher wants the Biden order to protect shareholder rights by forcing Chinese companies to meet same due diligence standards as U.S. companies and “ensure these investment restrictions are predictable and provide certainty to investors. Avoid creating an onerous, case-by-case screening process.”

He also wants Biden to “consult with allies and partners before implementing new restrictions and urge them to adopt parallel restrictions on investing in China.”

Last month, the Senate overwhelmingly approved legislation to requires notification of some outbound investments in China.

Commerce Secretary Gina Raimondo has said any restrictions on U.S. investors should not “be overly broad.”

Gallagher said on Tuesday the committee is investigating BlackRock and MSCI for facilitating the flow of American capital into companies the U.S. government has found guilty of fueling China’s military advancement or human rights abuses.

(Reporting by David Shepardson; Editing by Stephen Coates)