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1 1 (August 12, 2024)

handle is hein.crs/goveqhx0001 and id is 1 raw text is: Rnforming th Ueg s utove dabat scnee 1914 Regulation of U.S. Outbound Investment to China Introduction The U.S. government has generally supported an open investment environment at home and abroad to promote U.S. economic growth, sustain the U.S. position as a premier destination for foreign direct investment, and ensure U.S. competitiveness. The U.S. government's interagency Committee on Foreign Investment in the United States (CFIUS) reviews a small subset of foreign inbound investments, primarily mergers and acquisitions, that could result in foreign control of a U.S. business and raise potential national security concerns. Since 2016, some Members of Congress have focused on the potential U.S. economic and national security effects of certain U.S. outbound investments to the People's Republic of China (PRC or China), including the transfer of U.S. technology and know-how in sensitive or strategic areas. The 118th Congress is considering legislation to strengthen foreign investment review authorities and restrict some U.S. investment in the PRC and other countries of concern that involves dual-use and critical technology. In response to congressional activity, in August 2023, President Biden issued Executive Order (E.O.) 14105 to establish a targeted outbound investment program. Some countries (e.g., PRC, South Korea, Taiwan) have outbound investment regimes. While the E.O.'s proposed scope of covered activity is limited, it is considered a departure from traditional U.S. economic policy. Opponents argue that existing tools like sanctions and export controls can address risks. Proponents argue that new measures are needed to preserve a market- based climate and counter PRC policies that incentivize and require the transfer of U.S. technology and capabilities to PRC competitors to benefit the PRC government. Background and Policy Debate Since 2016, Congress has led efforts to strengthen U.S. foreign investment review and has considered regulating some outbound activity. Enactment of the Foreign Investment Risk Review Modernization Act (FIRRMA, Title XVII, Sub. A, P.L. 115-232) in 2018 enhanced authorities for CFIUS to review, mitigate, or restrict inbound foreign investments in U.S. businesses involved in critical technologies, critical infrastructure, or sensitive personal data, and certain real estate transactions. Other proposed FIRRMA provisions-e.g., on U.S. outbound investment-were diluted or eliminated during congressional and executive branch deliberations, following business pressure and other policy considerations. Instead, Members reformed U.S. export controls to regulate some critical and emerging dual-use technologies and technology transfer abroad. Since FIRRMA's enactment, Congress has returned to these investment issues, in part in response to high-profile PRC greenfield investments in the United States and U.S. investments in China in strategic sectors (e.g., semiconductors and biotechnology). U.S. investments in China include the creation of research and development Updated August 12, 2024 centers, production facilities, and joint ventures (JVs) with the PRC government and PRC firms. Some Members say U.S. portfolio investments support PRC firms in strategic sectors and also should be regulated. U.S. firms have benefitted from the ability to invest and sell in China as a top global market since the 1990s. Despite the commitments it made to join the World Trade Organization in 2001, the PRC maintains policies and practices that require firms to localize production in China and transfer technology to PRC firms in order to sell or operate in the market. Since 2014, the PRC government has issued additional industrial policies and economic security measures. The U.S. Chamber of Commerce, among other business groups, has expressed support for the Biden Administration's efforts to develop a thoughtful regime that safeguards American national security and economic leadership without unnecessarily restricting beneficial U.S. business activity. At the same time, the Chamber advocates for an approach that is narrowly tailored to target specific national security concerns in a transparent, efficient, and predictable manner, follows clear, workable rules, and avoids creating a chilling effect on firm activity. The Semiconductor Industry Association warns that foreign firms could fill any loss of U.S. market share in countries of concern that might result from any new restrictions. Congress ona Action Congress has sought to address what some Members see as statutory, regulatory, and implementation gaps with regard to CFIUS and export controls (see text box).

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