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America's quest to outcompete and compromise investments won't succeed

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U.S Capitol dome on Capitol Hill in Washington, June 9, 2022. /VCG

U.S Capitol dome on Capitol Hill in Washington, June 9, 2022. /VCG

Editor’s note: Hamzah Rifaat Hussain, a former visiting fellow at the Stimson Center in Washington and former assistant researcher at the Islamabad Policy Research Institute, is a TV anchor at Indus News in Pakistan. The article reflects the author’s opinions and not necessarily those of CGTN.

Bipartisan lawmakers in the United States led by Senators Bob Casey and John Cornyn announced on June 13 an agreement on legislation granting the U.S. government sweeping powers to block billions of investments into China.

The move is an attempt to increase the scope of a broader bill aimed at boosting U.S. competitiveness by targeting capital flows to Chinese firms. Such negotiations on competing with China in the absence of open hearings will only result in American firms being at a competitive disadvantage and this proposal is bound to fail both domestically and bilaterally.

Firstly, the provision purportedly aims at boosting American competitiveness but is less about securing the U.S. market or creating domestic opportunities for American businessmen but more about widening trust deficits.

A view of Wall Street in New York City, March 8, 2022. /VCG

A view of Wall Street in New York City, March 8, 2022. /VCG

The joint statement of senators Casey and Cornyn alongside representatives Rosa DeLauro, Bill Pascrell, Jr., Michael McCaul, Bryan Fitzpatrick and Victoria Spartz, for example, spoke about the prevention of “duplicative activities” despite the fact that the initial outbound investment initiative became controversial domestically over possibilities of declining corporate investments abroad being real.

This also goes against the principles of prioritizing cooperation instead of competition, which China has repeatedly stressed. Foreign Ministry spokesperson Wang Wenbin considered the proposal “over-generalized” the concept of national security, which will only deprive Washington of opportunities.

As a result, the U.S. has everything to lose. With conventional economic trade and cooperation being compromised due to reckless lawmakers endorsed by the Biden administration, an increased screening of investments provides Washington with unilateral authority to compromise normal economic ties.

According to a study by the Rhodium Group, 43 percent of American foreign direct investment into China would be subject to broad and categorical sifting, yet lawmakers remain fixated on “containing” China. National Security Adviser Jake Sullivan had stressed how American competitiveness in technology remains a top priority for the administration and new investment screening and evaluation of outbound investments of China is the right strategy. It is not.

The U.S.-China Business Council has considered curbs on outward investments as detrimental to the resilience and flexibility of American companies and if they are implemented through a federal oversight panel, it might coerce and pressurize American investors into disclosing investments in sectors such as pharmaceuticals, semi-conductors and batteries in China.

China’s message has been clear that it does not seek to partake in geopolitical competition yet hawkish lawmakers remain adamant that funding facilities such as factories or joint ventures that involve technology transfers to China need to be curbed. This is despite domestic criticism from the Treasury, which has expressed concerns over awarding federal oversight to the government as that would hamper American commercial activity and contribute to declining investments.

Here lies the disconnect. While U.S. lawmakers seek to gain a competitive advantage over China, they are in turn compromising competitiveness by targeting funding for Chinese startups and technology firms. The jurisdiction of the original bill is also being deliberately expanded to include targeting capital flows to Chinese firms as part of the policy; yet according to Republican senator and ardent critic of expanding outbound investment controls Pat Toomey, this proposal only grants the federal bureaucracy of the U.S. the authority to disrupt and halt the free flow of trade and investments.

Hence, America has everything to lose. The truth is that the quest to compromise investments with China by U.S. lawmakers will always fail on the merits.  

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