US Lawmakers Urge Yellen to Accelerate China Outbound Investment Regulations, According to Reuters

By Michael Martina

WASHINGTON – The leaders of a U.S. congressional committee focused on China from both the Republican and Democratic parties have called on Treasury Secretary Janet Yellen to swiftly implement restrictions on outbound investments to China. They express concern that Beijing is leveraging American investment to advance its technological capabilities while Yellen’s department considers new regulations.

In August, President Joe Biden issued an executive order allowing the Treasury secretary to restrict U.S. investments in Chinese entities within three key sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems. This order, which is expected to be enacted within the upcoming year as Treasury formulates new guidelines, aims to prevent U.S. capital and expertise from facilitating China’s military modernization.

China has criticized the executive order, and some lawmakers in the U.S. believe it contains significant loopholes. In a letter dated October 30, Mike Gallagher and Raja Krishnamoorthi, the Republican chair and ranking Democrat on the House select committee on China, expressed that while Treasury is finalizing definitions and parameters for the investment guidelines, the Chinese Communist Party (CCP) continues to develop advanced technologies with support from American investments.

The lawmakers urged Yellen to adopt a broad definition of technology in these guidelines, stating that the CCP has blurred the lines between commercial and military technology. They cautioned that if the restrictions are too narrowly defined, the CCP will likely find ways to circumvent them. Gallagher and Krishnamoorthi emphasized that Yellen should avoid allowing exemptions that could undermine the impact of the rules.

They also indicated that Treasury should collaborate with U.S. authorities to impose maximum penalties for violations and should address passive capital flows from the U.S., such as investments through public markets and mutual funds.

Some officials have expressed the need for the outbound investment rules to remain balanced, cautioning against overly broad measures that might harm the U.S. economy. However, others, including former officials from the Biden administration, view the initiative as a positive initial step, asserting that Congress should allocate resources to broaden these restrictions.