Although former national security officials agreed that the U.S. should consider outbound investment review restrictions, they panned a congressional proposal that would have granted a new interagency committee “sweeping” power to restrict capital flows to China. Speaking during a House Financial Services Committee hearing this week, some of the former officials said Congress should rethink the proposal and also urged the Biden administration against issuing a unilateral executive order to establish an outbound investment review regime.
Exports to China
Russian customs data shows the country’s sanctioned defense companies are buying navigation equipment, jamming technology, jet-fighter parts and more from China, The Wall Street Journal reported Feb. 4. Russia has imported tens of thousands of shipments of dual-use goods since its invasion of Ukraine last year, most of them from China, the report said. Although the U.S. and other Western nations have imposed strict export controls on technology to stop sensitive items from being sent to Russia, Moscow is able to sustain its military needs through countries that haven’t joined the U.S.-led sanctions effort, the report said, including Turkey and the United Arab Emirates. But Chinese companies are the “dominant exporters” of dual-use items to Russia, the report said.
In West Virginia, where the first House Ways and Means Committee hearing of the new Congress was held since the Republicans won the majority, the members asked questions of business owners, and were hosted by a mid-sized business that sells hardwood lumber to furniture makers, cabinetmakers and flooring manufacturers.
The U.S. should “acknowledge” the national security risks associated with outbound investments into China, said Nathaniel Fick, the first ambassador at large of the State Department’s recently established Bureau of Cyberspace and Digital Policy. Fick, speaking during a Feb. 2 event hosted by the German Marshall Fund, suggested he’s expecting government action around outbound investments soon.
New U.S. chip export controls are among the most complex export regulatory provisions ever published and have caused significant uncertainty in the semiconductor industry, trade groups and technology firms told the Bureau of Industry and Security in comments that were due this week. More than 40 companies, trade associations, law firms and others asked BIS to revise parts of the regulations or offer more guidance to avoid hurting U.S. competitiveness, with some saying the new controls may force foreign companies to stop using U.S.-origin items altogether rather than deal with the added compliance obligations.
The Biden administration recently notified companies it no longer will approve license applications for technology shipments to Huawei, moving toward a “total ban” on U.S. sales to the Chinese telecommunications company, the Financial Times reported this week. The Commerce Department already employs a strict licensing policy for exports to the company, but the report said the administration is looking to take “an even tougher stance on China, particularly in the area of cutting-edge technology.”
The chairman of the House Foreign Affairs Committee, Michael McCaul, R-Texas, promised a "thorough review of the policies and procedures" at the Commerce Department's Bureau of Industry and Security after the state-run China Academy of Engineering Physics reportedly was able to continue purchasing U.S.-made semiconductors since 2020 despite being on a U.S. export ban list since 1997.
The U.S. has been “abusing export controls” and “politicizing tech and trade issues and using them as a tool and weapon” to “hold on to its hegemony and serve its selfish agenda,” Chinese foreign ministry spokesperson Mao Ning said in response to a question about a reported agreement on chip controls between the U.S., the Netherlands and Japan (see 2301270002). “China is firmly against this,” she said at a regularly scheduled press conference Jan. 30. “Such practices serve no one’s interests. They destabilize global industrial and supply chains and have given rise to global concerns.”
Despite requests from industry, the Bureau of Industry and Security may push back on publishing a comprehensive list of advanced Chinese semiconductor fabrication facilities that are subject to the October chip controls, said Kevin Wolf, an Akin Gump lawyer and former BIS official. But the agency could meet industry halfway and publish a list similar to its military end-user list (see 2012220027), which could be a regularly updated, noncomprehensive set of facilities subject to the agency’s China chip controls.
The U.S. should impose sanctions against China for allowing its companies to continue to supply semiconductors and other dual-use technologies to Russia, said Sen. Bob Menendez, chair of the Senate Foreign Relations Committee. Although the U.S. has penalized specific Chinese companies for supplying Russia -- including new sanctions this week -- Menendez said he wants to see a more “robust” set of measures.