US President Donald Trump signalled he may take a less confrontational path toward curbing Chinese investments in sensitive American technologies, potentially relying on a US committee that scrutinises foreign acquisitions for national security risks.
Trump made remarks on Tuesday at the White House that appeared to align with Treasury Secretary Steven Mnuchin’s approach, in an internal administration debate over how to protect US intellectual property from China.
Trump directed the Treasury Department in March to weigh options for restricting Chinese investment in American companies. In May, he said the US “will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology”.
China’s Ministry of Commerce said in a statement on Wednesday that it is paying close attention to developments and will evaluate the potential impact on Chinese companies.
Most Asian stocks declined on Wednesday as concerns lingered over the impact of potential global trade restrictions. The Chinese currency’s slump continued, with the offshore yuan falling for a 10th day, matching its longest run of declines on record. The dollar and Treasury yields were steady.
Within the administration, officials have disagreed over how to limit investment. Mr Mnuchin favours using the Committee on Foreign Investment in the US (CFIUS), which reviews foreign acquisitions of US companies for national security risks. Others favour a more aggressive approach: declaring an economic emergency and invoking a little-used 1977 law called the International Emergency Economic Powers Act.
“We have the greatest technology in the world, people copy it and they steal it, but we have the great scientists, we have the great brains, and we have to protect that,” Mr Trump said. “And that can be done through CFIUS, we have a lot of things we can do it through.”
Mr Trump said that China isn't the only country to be targeted by investment curbs, echoing Mr Mnuchin's denial of reports by Bloomberg News and The Wall Street Journal on Sunday.
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“It’s not just Chinese. We don’t want people coming in,” Mr Trump said. “We are a very smart country. We have the most incredible people in Silicon Valley. We don’t want China or other countries.”
Reports that the US was considering more extreme unilateral measures against China such as invoking the IEEPA rattled markets, sending stocks in the US and Asia down on Monday. Mr Mnuchin in the afternoon tweeted that a report he will publish on Friday “is not specific to China, but to all countries that are trying to steal our technology”.
“To say that they are going to implement something like this with a clearly protectionist reason with regard to China is fairly jarring – it would be a huge break in terms of open investment traditions of administrations of the past several decades,” said Brian Fleming, a former Justice Department lawyer who worked on the IEEPA. “It would alter the calculus and playing field in how China competes and invests in the US.”
White House trade adviser Peter Navarro sought to ease investor concerns about US trade policy, saying there were no plans to impose restrictions.
“All we’re doing here with the president’s trade policy is trying to defend our technology when it may be threatened,” Mr Navarro said in a CNBC interview on Monday, with the Dow Jones Industrial Average down more than 400 points.
Meanwhile, Congress is working on legislation to expand the mandate for CFIUS. If passed, foreign investors seeking to buy US companies would face higher hurdles for regulatory approval. The Trump administration has backed companion proposals from the House and Senate.
“Trump may want to turn his trade rhetoric against China into concrete action, but he will ultimately be limited in the scope of actions he will take due to his paramount domestic political considerations,” said Stephen Myrow, managing partner at Beacon Policy Advisers in Washington.
If a market backlash is causing Trump to retreat on investment restrictions, “then it will be extremely difficult for him to follow through with his threatened second round of tariffs”, Mr Myrow said.
