The U.S. should create an outbound investment screening regime that focuses on capturing “smart money” investments in critical technology industries in China, said Emily Kilcrease, a senior fellow with the Center for a New American Security and former National Security Council official. Smart money investments would include those that are “accompanied by managerial expertise or other intangible benefits” that could advance China’s “indigenous technology capabilities,” she said.
Public U.S. companies should update their China-related risk disclosures to factor in a range of potential trade restrictions on the horizon, including possible U.S. sanctions against Beijing for aiding Russia and new outbound investment restrictions, said Carl Valenstein, a trade lawyer with Morgan Lewis.
DOJ’s recent emphasis on corporate compliance may cause companies to update how they conduct due diligence on investment transactions, Morgan Lewis said in a new report released this month. The firm said DOJ is increasingly playing a more active role in the Committee on Foreign Investment in the U.S., which could prompt investors to reassess their procedures for evaluating sensitive deals.
The head of TikTok said the U.S. shouldn't have concerns about its parent company, ByteDance, even as lawmakers said they believe the Chinese government can use the company to access sensitive data collected by the app. TikTok CEO Shou Chew said the app is not controlled by China and said it has built a firewall to prevent U.S. personal data from “unauthorized foreign access.”
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The Committee on Foreign Investment in the U.S. is “demanding” that TikTok’s owner, China-based ByteDance, sell its shares in the app or face a potential U.S. ban of the app, The Wall Street Journal reported March 15. The CFIUS demand, which the report said came “recently,” is a major shift in policy for the Biden administration, which has been reviewing TikTok for months (see 2209260008). It also comes amid pressure from Congress to quickly conclude the review with strong restrictions between the app and ByteDance (see 2302220024). The Treasury Department didn’t comment.
The Committee on Foreign Investment in the U.S. should “be prepared to carefully review” any investments related to the closures of Silicon Valley Bank and Signature Bank, Sen. Marco Rubio, R-Fla., said in a March 15 letter to Treasury Secretary Janet Yellen. Rubio said he’s concerned China and its companies may be looking to “exploit this moment for their own” benefit after both banks collapsed this week.
The Committee on Foreign Investment in the U.S. is placing a significant focus on investments that could present data or cybersecurity risks, said CFIUS head Paul Rosen and FBI official Cynthia Kaiser. Rosen also said CFIUS continues to actively pursue non-notified deals and said the administration is still discussing the idea of an outbound investment review regime.
Although the Committee on Foreign Investment in the U.S. has increased scrutiny of Chinese investments in recent years, it still continues to clear a range of transactions involving China, said Antonia Tzinova, a CFIUS lawyer with Holland & Knight. Chinese investors are using several tactics to ensure their deals aren’t blocked, Tzinova said, and in some cases are restructuring their investment agreements.
The Biden administration's FY 2024 budget request includes funding to support a new outbound investment review “program” and more money for U.S. agencies to carry out export control and sanctions authorities.