WASHINGTON — The Coalition for a Prosperous America (CPA) is disappointed by a new Executive Order (EO) released by the Biden administration that failed to immediately restrict private-equity and venture-capital investments in three high-technology industries in China: semiconductors, quantum computing, and artificial intelligence. Contrary to press reports, the EO does not prohibit any investments in these technologies or require U.S. firms doing business in China to disclose their investments to the U.S. government. Instead, the EO directs Treasury to consult with other agencies and issue regulations in the indefinite future.
In testimony before the House Select Committee on the Chinese Communist Party (CCP) in May, Roger Robinson, Jr. delivered a comprehensive examination of how U.S. investor capital is being used to fund China’s malign activities that directly threaten U.S. economic and national security. Robinson is an advisor to CPA, former National Security Council (NSC) Senior Director of International Economic Affairs for President Ronald Reagan, and former Chairman of Congressional U.S.-China Economic and Security Review Commission.
“We are concerned that this Executive Order is merely symbolic,” said Michael Stumo, CEO of CPA. “We agree with the Biden administration that prohibiting investment in China is a national emergency and necessary to protect U.S. economic and national security. Unfortunately, the administration appears to also believe that this national emergency is not urgent enough to mandate any immediate action or a deadline for action. Instead of taking effect now, the Executive Order places no timeline on when the Treasury Department should issue rules. Treasury is the agency within the U.S. government that is the most pro-Wall Street.”
Earlier this year, CPA and a group of national security and foreign policy experts urged President Joe Biden to establish a mechanism to review U.S. outbound investment to China in order to address the risks and threats associated with U.S. capital bolstering the CCP’s ability to modernize and advance its military and build other advanced technologies. CPA also called on the House Financial Services Committee to crack down on Chinese outbound capital market investment.
Last year, CPA Chief Economist Jeff Ferry testified in front of the House Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets. The hearing, titled “Investing in our Rivals: Examining U.S. Capital Flows to Foreign Rivals and Adversaries Around the World,” looked at the risks posed to American investors by nations that are adversarial and hostile to U.S. interests—most notably Russia and the People’s Republic of China (PRC).
Ferry’s testimony focused on the problem of U.S. investor exposure to Chinese securities, the risks this poses to U.S. economic and national security and potential solutions that should be considered. In particular, Ferry called on Congress to address the bulk of “bad actor” Chinese companies that are still present in American passive investment products. For example, China’s SenseTime was sanctioned by the U.S. government, which banned all U.S. investments in the firm because it “developed facial recognition programs that can determine a target’s ethnicity, with a particular focus on identifying ethnic Uyghurs.” Incredibly, FTSE Russell announced in January that, following confirmation from the Office of Foreign Assets Control (OFAC), they would evaluate SenseTime for index eligibility for the FTSE Global Equity Index Series March 2023 semi-annual review.
