U.S. lawmakers should take action to ban China’s state-owned firms from acquiring U.S. companies, a congressional panel charged with monitoring security and trade links between Washington and Beijing said on Wednesday.
In its annual report to Congress, the U.S.-China Economic and Security Review Commission said the Chinese Communist Party has used state-backed enterprises as the primary economic tool to advance and achieve its national security objectives.
The report recommended Congress prohibit U.S. acquisitions by such entities by changing the mandate of CFIUS, the U.S. government body that conducts security reviews of proposed acquisitions by foreign firms.
“The Commission recommends Congress amend the statute authorizing the Committee on Foreign Investment in the United States (CFIUS) to bar Chinese state-owned enterprises from acquiring or otherwise gaining effective control of U.S. companies,” the report said.
CFIUS, led by the U.S. Treasury and with representatives from eight other agencies, including the departments of Defense, State and Homeland Security, now has veto power over acquisitions from foreign private and state-controlled firms if it finds that a deal would threaten U.S. national security or critical infrastructure.
If enacted, the panel’s recommendation would essentially create a blanket ban on U.S. purchases by Chinese state-owned enterprises.
The report “has again revealed the commission’s stereotypes and prejudices,” Chinese Foreign Ministry spokesman Geng Shuang said in Beijing.
“We ask that Chinese companies investing abroad abide by local laws and regulations, and we hope that relevant countries will create a level playing field,” he told a daily news briefing.
The panel’s report is purely advisory, but could carry extra weight this year because they come as President-elect Donald Trump’s transition team is formulating its trade and foreign policy agenda and vetting candidates for key economic and security positions.
Congress also could be more receptive, after U.S. voter sentiment against job losses to China and Mexico helped Republicans retain control of both the House and the Senate in last week’s election.
Trump strongly criticized China throughout the U.S. election campaign, grabbing headlines with his pledges to slap 45 percent tariffs on imported Chinese goods and to label the country a currency manipulator on his first day in office.
“Chinese state owned enterprises are arms of the Chinese state,” Dennis Shea, chairman of the U.S.-China Economic and Security Review Commission, told a news conference.