By Karen Freifeld
WASHINGTON (Reuters) – A top U.S. lawmaker on Thursday asked for more detail on the Biden administration’s proposed executive order on U.S. investments in China, questioning whether the planned restrictions would be effective.
Republican U.S. Representative Patrick McHenry, chair of the House of Representatives Committee on Financial Services, sent a letter to Treasury Secretary Janet Yellen, requesting information related to the proposal ahead of Yellen’s June 7 scheduled hearing appearance before the committee.
The Biden administration is planning to screen the billions of dollars that U.S. firms pour into sensitive sectors in China. China hawks in Washington blame American investors for transferring capital and valuable know-how to Chinese tech companies that could help advance Beijing’s military capabilities.
Earlier this month, Yellen said the government had not finalized its approach, but that any U.S. action would be “narrowly scoped and targeted at technologies where there are clear national security implications.”
She said that Washington had been discussing the prospect of such targeted restrictions with G7 allies. She did not give a timetable for action.
In his letter to Yellen, McHenry, a key voice on potential investment restrictions on U.S. companies in China, noted the size of China’s reserves and that it had recorded a current account surplus of $417.5 billion last year. He also said a 2014 attempt to restrict financing against Russia had failed.
“Do Treasury and the Administration really believe that investment restrictions will be effective this time — particularly against a surplus country that holds $3 trillion in reserves?” McHenry wrote.
A Treasury Department spokesperson did not immediately respond to a request for comment.
Reuters reported in February that the Biden administration was planning to outright ban investments in certain Chinese technology companies and require investors to provide notification of many other transactions, citing three sources.
The ban was expected to apply to some investments tied to chip production, two of the sources said at the time, and would likely track restrictions the U.S. placed in October on exports to China of American artificial intelligence (AI) chips, chipmaking tools, and supercomputers, among other technologies.
(Reporting by Karen Freifeld; additional reporting by Daphne Psaledakis and Pete Schroeder. Writing by Susan Heavey and Caitlin Webber; Editing by Doina Chiacu and Rosalba O’Brien)