Bill could block FinTech, AI investment in China

The US president has the power to block certain investments in US companies from foreign companies if they are seen as a threat to national security, but a new proposed bill could extend government powers to block US investments in certain countries such as China.

Congress is pushing for legislation that would propose screening investments in countries seen as adversaries, such as China, to protect US technology and rebuild critical supply chains, the Wall Street Journal reported.

The bill, which counts bipartisan support, will require U.S. companies and investors to disclose certain outgoing investments, and it will create a new cross-council panel to review and block investments based on national security. The move would require U.S. entities and their affiliates to notify the federal government of activities in China and any “country of concern”, defined as “foreign adversary” in sectors considered critical to the supply chain, or if it involves “critical emerging” technologies. These sectors and technologies include semiconductors, high capacity batteries, pharmaceuticals, rare earth elements, biotechnology, artificial intelligence, quantum computing, hypersonic, financial technology and autonomous systems.

The bill has gained momentum in the House and Senate, and after months of delays and attempts to limit the scope of the bill, lawmakers could push for a vote before the July 4 break, according to House Majority Leader Steny Hoyer.

“Creating an outbound investment audit mechanism is a critical tool as Congress works to provide protection railings on taxpayers’ funds and protect our supply chains from countries concerned, including the People’s Republic of China,” said Casey and Cornyn and five members of the House of Representatives. statement Monday.

The bill aims to limit the transfer of technology and knowledge to China, and it will cover greenfield investments such as construction of new facilities, joint ventures involving the transfer of knowledge or intellectual property, venture capital and private equity transactions, the text states.

The updated legal text proposes the establishment of a committee for national critical capabilities to screen investments, but it does not specify which agency will lead it. Lawmakers originally proposed the U.S. Trade Representative, but some critics said the USTR did not have the resources to do so. Another option is the Treasury Department, which chairs the Foreign Investment Committee (CFIUS) and is responsible for assessing foreign investment in U.S. companies, even if the final decision to block a potential acquisition or investment lies with the president.

The bill threatens to delay some agreements as the investment restrictions will apply to US entities and all “affiliates”, which also includes investment cars created by US venture companies to invest in China. Companies will be required to notify the government 45 days before the planned foreign investment activity, the text states. The government can also stop an agreement if an entity fails to notify the transaction. This regulatory layer is in addition to other possible regulatory assessments of antitrust or foreign investment in the destination country.

The EU’s approach to foreign investment

For the US measure to be fully effective, other nations may need to follow suit, or it could put U.S. companies at a disadvantage, according to some legal experts.

The EU recently adopted a screening investment mechanism very similar to CIFUS to protect EU targets from Chinese companies. The EU does not appear to have on its political agenda the adoption of a trade instrument to control outgoing investment in other countries, but recent bills such as the EU Chips Act indicate that the bloc has an interest in defending certain sectors and avoiding disruptions in the supply chain. .

Read more: The European Chips Act provides $ 12.6 billion to companies producing in the EU