In a move that is bound to heighten tensions with Beijing, President Biden signed an executive order on Thursday that gives the federal government more power to block Chinese investment in technology in the United States.
The secretive Committee on Foreign Investments was created by Congress nearly 50 years ago. The committee used to only be able to block foreign acquisitions of American firms that might have a direct impact on national security.
The committee is directed to consider whether a pending deal involves the purchase of a business with access to Americans' sensitive data and whether a foreign company or government could exploit that.
The wording reflects growing unease about China being able to access the personal information that Americans give over to mobile apps and other services. Critics worry that TikTok, a popular Chinese-owned video app, could expose its users' data to the Chinese government.
The review of TikTok has yet to be said about. The attempt to sell the American operations of TikTok to a group of American and other Western companies fell apart in the last months of the Trump administration.
TikTok employees in China may have been able to access data about Americans who signed up for the service. There is no evidence that the company has given data to the Chinese government. The issue is whether the transfer of all that data would solve the problem or just make it worse. There are still questions about who designed the software that tracks Americans online.
The databases of the Office of Personnel Management were hacked by the Chinese intelligence agencies. The information that 22.5 million Americans had filed for security clearances was in the possession of the Chinese. The data has never been clear what China did with it.
The executive order does not give the Biden administration the authority to regulatebound investment by American companies in foreign nations. China requires foreign companies to give up technology in exchange for entering the Chinese market.
The former director of operations and intelligence for Britain's Secret Intelligence Service wrote in The New York Times that covert operations by Chinese operatives are about survival. Chinese citizens are often ordered to help intelligence agencies in China.
Specific types of transactions that would give a foreign power access to technologies that Mr. Biden believes are critical to American economic growth have been directed by the new order. According to a White House summary, that includes advanced clean energy and climate adaptation technologies.
While China is not mentioned in the order, all of those are areas that are part of the "Made in China" drive started seven years ago by the president.
A new interpretation of the committee's authority has been underway for several years. The White House believes that the authorizing laws of the group do not need to be amended in order to be focused on certain technologies.
For most of its history, CIFIUS only looked at transactions in which a foreign firm tried to buy a controlling interest in an American company. Many of the sales were blocked because it concluded that the firms provided weapons systems or products to the intelligence agencies. Intelligence officials from the Department of Defense are on the committee. Firms in the US were required to give up sensitive technology before a transaction could go through.
It became obvious over time that a foreign firm didn't need a majority share in the company in order to get key technologies. Over the past seven or so years, the power of the group has grown and it now has the power to block minority investments. Fears that Chinese state-owned firms were setting up venture capital funds in Silicon Valley and beyond led to that.
A White House statement said that the new order would look at the characteristics of the technology itself, not the size of the investment, and that it would look at advances and applications in technology that could undermine national security.
If the technology had the potential to be important to national security, it wouldn't have to be established that it is. Artificial intelligence software or quantum computers that create strong encryption of data, or break it, could cause the government to take action to keep it out of the hands of Chinese or other competitors.
The order gives the committee the power to block any deal that harms the United States. It calls for a review of investments over time in a sector or technology that could be used for domestic development.
David was a contributor.
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