U.S. lawmakers may soften legislation that aims to heighten scrutiny of Chinese investment in the U.S. technology sector.
The Foreign Investment Risk Review Modernization Act (FIRRMA) seeks to expand the power of the Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee that reviews foreign investment for national security concerns.
The two identical bills in the House and Senate were introduced last November by Senator John Cornyn of Texas and Congressman Robert Pittenger of North Carolina. The White House endorsed the legislation in a statement on Jan 24.
Reuters on Thursday quoted unnamed sources as saying that revisions to the bills in both the Senate and the House of Representatives are being made after protests by big US companies that fear losses in sales.
Cornyn's staff is drafting changes to address industry concerns, Reuters reported.
The report quoted Pittenger as saying that some "clarifications" are being considered to prevent businesses from being inadvertently affected, but added that the bill would still meet its goal of protecting US national security.
"Are we listening to input? Yes," Pittenger said. "Will we make appropriate tweaks and adjustments to not inadvertently clamp down on legitimate investment? Yes. Will we soften this bill so that China or other countries with malicious intent can continue to exploit our companies to threaten America's national security? Never."
The CFIUS review process is so far voluntary, but CFIUS may initiate its own review and reverse a transaction for some transactions not submitted for prior review but regarded as having national security implications.
Specifically, FIRRMA would expand CFIUS' review of non-controlling investments, creating mandatory filing requirements for investments with government ownership and applying entirely new controls on technical cooperation between U.S. and foreign companies.
Joshua Berman, a partner at Clifford Chance, believes that resistance to certain provisions in the legislation is expected from sectors of the US business community.
"The strongest concern in industry appears to involve the expansion of CFIUS to cover outbound controls," he said in an article posted on the law firm's website on Wednesday.
"If enacted, these changes could have broad implications for both overseas investors looking to participate in the US economy and US technology companies seeking access to opportunities outside the United States," said the article by Berman and his colleagues.
The article — FIRRMA: Addressing the "Weaponization" of Cross-Border Investment through CFIUS Reform? — described the cumulative effect of the new provisions as still somewhat unclear.
"They do offer benefits for some transactions, in the form of streamlined review processes and white lists, but an increased burden for many others — most notably emerging technology investment and collaboration with countries of concern to CFIUS, such as China," the article said.
Berman and his colleagues believe that the legislation intends to create a more flexible, less voluntary system that each administration can tailor, perhaps on a case-by-case basis, to address the perceived threat posed by inbound investment and outbound technical collaboration.
"This flexibility may have its benefits, but it also has its risks. We should be prepared for CFIUS priorities to change with different administrations, and for the cross-border investment landscape to become less predictable for American and foreign business as a result," the article said.
Ted Moran, a nonresident senior fellow at the Peterson Institute for International Economics, expressed concern whether FIRRMA would allow CFIUS to preclude foreign acquisitions by companies from certain countries across entire sectors, rather than evaluate national security threats within sectors.