Experts expressed deep concern over bills introduced Wednesday by US lawmakers to expand the scrutiny of foreign investment in the United States, targeting in particular investors from China.

The bills, known as the Foreign Investment Risk Review Modernization Act (FIRRMA), were introduced by a bipartisan group of lawmakers in both the Senate and House of Representatives.

John Cornyn, a senator from Texas, introduced a bill to broaden the government's power to stop foreign purchases of US companies by strengthening the Committee on Foreign Investment in the United States (CFIUS).

Robert Pittenger, a Republican congressman from North Carolina, introduced an identical bill in the House.

"China is buying American companies at a breathtaking pace. While some are legitimate business investments, many others are part of a backdoor effort to compromise US national security," Pittenger said in a press release on Wednesday.

"The introduction of the concept of the 'country of special concern' is likely to be a contentious point for US-China relations, as comments of the sponsors of this legislation have made it clear that the provision, and other features of the legislation, are targeted at Chinese acquisition in the United States," Scott Flicker, a partner at law firm Paul Hastings LLP, told China Daily on Wednesday.

He expressed that the sponsors of the legislation include prominent members across the political spectrum. "This increases the likelihood some form of the legislation will pass and become law, although the timing is highly uncertain," Flicker said.

In an article published last month, Flicker wrote "that CFIUS is growing more biased against Chinese deals".

Ted Moran, a nonresident senior fellow at the Peterson Institute for International Economics, said that for more than four decades, the US has worked to widen access for trade and investment throughout industries in foreign markets, under both Republican and Democratic administrations.

"This change would reverse direction, quite probably undermining much progress that has been made," he told China Daily on Wednesday.

Moran expressed concern over whether FIRRMA would allow CFIUS to preclude foreign acquisitions by companies from certain countries across entire sectors, rather than evaluate national security threats within sectors.

"The danger is that FIRRMA would follow the procedure introduced in the 2017 CFIUS rejection of the acquisition of Lattice Semiconductor by Canyon Bridge Partners, a Chinese private-equity firm with ties to the Chinese government," he said.

On Sept 13, US President Donald Trump issued an executive order blocking the Lattice deal on national security grounds. The case marked the fourth time in 30 years that a US president has blocked a transaction out of security concerns. All four cases have involved Chinese investors.

In its annual report to Congress published in September, CFIUS said Chinese deals made up 29 percent of the 143 transactions it reviewed in 2015, the highest number among all nations.

The White House issued a justification for the rejection of the Lattice deal: "The national-security risk posed by the transaction relates to, among other things, the potential transfer of intellectual property to the foreign acquirer, the Chinese government's role in supporting the transaction, the importance of semiconductor supply chain integrity to the United States Government, and the use of Lattice products by the United States Government."

"The reference to the 'importance of semiconductor supply chain integrity' is clearly a new and expansive rationale for a negative ruling by CFIUS," Moran said.

He said the Trump administration may be taking a much broader and more protectionist approach toward foreign acquisitions, in particular Chinese acquisitions, than previous administrations, even without waiting for changes in CFIUS legislation.

FIRRMA claims that CFIUS has not been substantially updated since the Ford administration of the 1970s. The new bills aim to expand CFIUS jurisdiction to include joint ventures, minority position investments, and real estate transactions near military bases and other sensitive national security facilities.

It also updates CFIUS' definition of "critical technologies" to include emerging technologies that could be essential for maintaining the US technological advantage over countries that pose threats.

In 2016, Chinese foreign direct investment in the US jumped to $46 billion, a 200 percent increase from the previous record in 2015, according to a report by New York-based Rhodium Group and the National Committee on US-China Relations.

By the end of 2016, 425, or 98 percent, of the 435 US congressional districts in the US host Chinese companies. Chinese-owned companies directly employ 141,000 American workers. The numbers for indirect employment are estimated in the tens of thousands.

US governors and mayors have shown great enthusiasm for wooing Chinese investors to boost local economies and create jobs. Many of them embark on regular investment and trade missions to China.

chenweihua@chinadailyusa.com

(China Daily 11/09/2017 page3)