Trump Softens Threat Of New Curbs On Chinese Investment In US Firms

The announcement comes amid an intensifying trade war between US and China. (File)

The Trump administration said it would rely on an existing Treasury Department-led committee to restrict new Chinese investments in American technology companies, backing away from a more aggressive approach that would have declared a national economic emergency and dramatically limited China's ability to invest in the U.S.

President Donald Trump opted instead to rely on legislation to enhance the powers of the committee known as the Committee on Foreign Investment in the United States or CFIUS, which reviews proposed acquisitions of U.S. assets by foreign investors. At the end of its review, the president can block proposed investments.

Both the House and Senate have passed versions of a bill to increase the panel's authority to review a variety of investments not covered under current law, including minority stakes. The measures passed with strong bipartisan support in both chambers. On Tuesday, the House bill was approved by a margin of 400 to 2.

The move caps an intense internal debate between Treasury Secretary Steven Mnuchin, who favored working within the beefed-up CFIUS process, and trade hard-liners like Peter Navarro, a White House adviser. The administration's get-tough-on-China faction urged the president to employ sweeping powers under the International Emergency Economic Powers Act (IEEPA,) which would have allowed him to impose harsh limits.

The administration's action grows out of a report by the Office of the U.S. Trade Representative, which concluded that China seeks to acquire American technology through such investments. But the CFIUS process applies to all foreign countries not just China.

Wednesday's announcement comes amid an intensifying trade dispute between the U.S. and China. Tariffs on $34 billion in Chinese products are scheduled to take effect on July 6, with additional trade barriers planned in subsequent weeks. China has pledged to retaliate with equivalent measures.