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On Tuesday, January 30, 2024, at 10:00 a.m. (ET) Subcommittee on National Security, Illicit Finance, and International Financial Institutions Chair Congressman Luetkemeyer and Ranking Member Congresswoman Beatty will host a hearing entitled, “Better Investment Barriers: Strengthening CCP Sanctions and Exploring Alternatives to Bureaucratic Regimes."
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Witnesses for this one-panel hearing will be:
• The Honorable Thomas Feddo, Founder/Principal, The Rubicon Advisors LLC
• The Honorable Richard Ashooh, Vice President of Global 1Trade and Government Affairs for Lam Research Corporation
• Ms. Emily Kilcrease: Senior Fellow and Director of the Energy, Economics, and Security Program, Center for a New American Security
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Background
Concerns that the U.S. government should do more to prevent China from using U.S. capital and expertise to grow and improve their military capabilities and control key elements of the supply chain have driven congressional and executive actions over the last six years. These actions include a range of national security mechanisms, such as investment screening, export controls, sanctions, and trade. Both the Trump and Biden administrations aggressively used entity listings to block sales of technologically sophisticated items to China and pursued executive orders prohibiting U.S. investments in security and surveillance companies associated with the PRC. For its part, Congress passed significant legislation such as the Foreign Investment Risk Review Modernization Act (FIRRMA) and the Export Control Reform Act (ECRA) and has considered a number of additional steps.
Over the same period, China’s economy has slowed considerably and financial flows between the U.S. and China have dropped, driven by decreased U.S. investment (de-coupling/derisking). Nevertheless, the economic connection remains substantial and varied. As of May 2021, 248 companies headquartered in mainland China were listed on the NASDAQ, NYSE, or NYSE American with a market cap of approximately $2.1 trillion. Chinese companies raised $19 billion in primary and secondary offerings on U.S. exchanges in 2020. Even as capital leaves China on net, foreign companies continue to make substantial investments in China.
China’s Economy
China has been a driver of the global economy for three decades, as persistently high growth lifted its economy from low-income to upper-middle-income status. Its 2022 GDP of $18.3 trillion was 73 percent of U.S. GDP, as compared to only 7 percent in 1990. China’s per capita income grew proportionally, lifting hundreds of millions out of poverty.
In 2022, China relied on investment and exports to achieve a gross domestic product (GDP) growth rate of 3%, well below initial government and international projections. The IMF estimates that China’s growth rate for 2023 was 5.4%, and many economists foresee further deterioration.
Biden Executive Order on Outbound
On August 9, 2023, President Biden issued Executive Order 14105, “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern.” The Order declares a national emergency to address the threat to the United States posed by certain countries of concern that seek to develop and exploit sensitive or advanced technologies or products critical for military, intelligence, surveillance, or cyber-enabled capabilities. At the same time the Order was issued, Treasury issued an Advance Notice of Proposed Rulemaking (ANPRM).
Mechanisms
The Office of Foreign Assets Control (OFAC)
OFAC administers and enforces economic and trade sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers, who are involved in activities related to threats to the United States’ national security. When a person or entity is sanctioned (or “designated”), any transactions they have with a U.S. person are generally prohibited unless otherwise authorized with an OFAC license. In addition, foreign persons who provide financial or other support to a sanctioned entity may themselves run the risk of being sanctioned. Because of their scope, sanctions are considered the most far-reaching coercive measure against a foreign person, unlike narrower export controls or ad hoc investment restrictions.
Committee on Foreign Investment in the United States (CFIUS)
Formed under a 1975 Executive Order to monitor U.S. policy on foreign investments, CFIUS is an interagency committee of the executive branch...
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