WASHINGTON — A prominent House Republican voice on the national security threat posed by China has criticized the White House’s plan to restrict outbound investment in Chinese military and defense companies, saying it fails to address the core issue.
Representative Mike Gallagher, the chairman of the House Select Committee on the Chinese Communist Party, stated on CNBC’s “Squawk Box” that President Joe Biden’s executive order, set to be implemented next year, “takes an important step in the right direction.” However, he believes it should have also considered public market investments in Chinese firms collaborating with the Chinese military or complicit in human rights abuses.
The executive order will mandate outbound U.S. investors to notify the Treasury Department about transactions involving certain technologies that could pose a threat to the United States.
Gallagher argues that investment restrictions should not only serve defensive national security purposes but should also be a weapon to weaken China’s economic stature and military capabilities by cutting off funds to offending companies.
He asserts that investments tied to American retirement plans, for instance, should not be dependent on companies that could jeopardize the long-term security of the investors.
Around 50 firms, including machinery, aircraft, and technology companies, have been flagged by the House CCP Committee, effectively creating a de facto blacklist.
China’s position as the third-largest U.S. trading partner behind Mexico and Canada poses a challenge for the White House, as it must restrict specific U.S. investments while maintaining stability in the overall bilateral trade relationship.
Furthermore, Gallagher’s statements come in response to China’s announcement of considering countermeasures to Biden’s executive order.
Last month, the House CCP Committee sent inquiries to global investment firms MSCI and BlackRock, seeking more information about their direction of U.S. investments into companies blacklisted by the committee.
Gallagher stresses the need to close loopholes and ensure that American dollars do not knowingly or unknowingly fund the Chinese Communist Party.
Treasury Secretary Janet Yellen has been granted broad authority by the executive order to determine what constitutes a covered investment. Gallagher believes this authority is excessive.
There is an ongoing debate about the scope of the investment restrictions, with the White House facing opposition from China skeptics in Congress, including Republicans and Democrats.
Yellen has stated her intention to keep investment restrictions narrowly targeted for the purpose of protecting U.S. national security, asserting that they are not aimed at weakening China’s economy.
The Treasury is currently accepting public comment on the proposed rules of the executive order until September 28th. However, no formal timeline has been released regarding the issuance of final rules on outbound investment restrictions.
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