Oversight of US Investment into China

No country seriously competing with another sends it almost $800 billion over four years. This is the amount of new American investment in the People’s Republic of China (PRC) from 2017 through 2020. In 2021, the value of American investment in the PRC dropped, but only because the Chinese government attacked its private sector. American investment in the PRC could have risen sharply in 2022 and 2023 and the US would not yet know, much less have limited the spending in any way. Beyond the raw amount of money, the US does not monitor what’s being funded, leaving policy-makers ignorant of the extent of support of potentially dangerous Chinese military and civilian technology.

Trade actions to date, such as tariffs, to confront the PRC for its behavior are not nearly as financially important as this investment flow.1And while less dependence on key Chinese materials, from chemical precursors to lithium, is the top economic priority, even this is made more difficult by US financial support of China.

A narrow executive order (EO) that could be in effect for less than a year is not enough. A narrow notification bill with no teeth is not enough. Banning new investment in a few firms is not enough. It’s irrational for the same technologies the US tries to control through exports and protects from Chinese acquisition here to be eligible for unlimited American financing. Outbound investment monitoring should be greatly upgraded in order to respond to changes in spending patterns and the US should stop helping the PRC develop advanced technology.

Read the full testimony in front of the House Select Committee on the Chinese Communist Party here.