US needs to prevent investments from aiding China’s military, lawmakers warn

More than 40 bipartisan lawmakers are calling for Congress to toughen restrictions on outbound investments in the People’s Republic of China (PRC) — which is under control of the Chinese Communist Party — that could undermine U.S. national security by boosting China’s capabilities in dual-use technologies that benefit its military.

Rep. Mike Gallagher, R-Wis., Sen. Dan Sullivan, R-Alaska, and 41 lawmakers from both sides of the aisle wrote the bipartisan leaders of the House and Senate Armed Services Committee to urge the inclusion of strong restrictions on outbound U.S. investments in China and other adversarial nations in a must-pass defense policy bill. 

The armed services panels are negotiating the annual National Defense Authorization Act (NDAA), a key piece of legislation that sets defense and other national security policies and outlines spending levels.

“We are deeply concerned about the potential national security threats posed by outbound capital flows and knowledge transfer to the United States’ adversaries, particularly the People’s Republic of China,” the lawmakers wrote. “To this end, we write urging you to ensure that language addressing outbound investments in certain sectors of foreign countries of concern is included in the National Defense Authorization of 2024, and ideally strengthen the language.”

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Bipartisan members of Congress are calling for outbound investment screening to prevent U.S. funds from aiding China’s military modernization. (Photo by Meng Yongmin/Xinhua via Getty / Getty Images)

“We have known for some time that U.S. companies are sending capital, intellectual property, and innovation to the PRC, fueling its advance in dual-use critical technology areas. To safeguard our national security, the U.S. needs visibility into our vulnerabilities by requiring, at a minimum, notification of sensitive investments by U.S. firms in these countries,” they added.

The lawmakers wrote that outbound investment screening would fill a gap in the U.S. government’s ability to address national security threats and would build on similar tools like export controls and sanctions as well as inbound investment screening, such as that done by the Committee on Foreign Investment in the U.S.

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J-20 stealth fighter jets rehearse for the upcoming 2023 Changchun Air Show on July 24, 2023 in Changchun, Jilin Province of China. (Photo by VCG/VCG via Getty Images / Getty Images)

They added that those current tools do not “fully address the specific risk posed by the transfer of U.S. capital and know-how to our adversaries.”

“The last thing we should be doing is facilitating technology that could one day be used against us, whether through espionage at home or against our servicemen and women deployed to fight for their nation,” the lawmakers added.

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Chairman Rep. Mike Gallagher, R-Wis., left, and Ranking Member Rep. Raja Krishnamoorthi, D-Ill., are among the lawmakers to sign the letter. (Tom Williams/CQ-Roll Call, Inc via Getty Images / Getty Images)

The outbound investment screening for potential national security risks called for in the letter recently received broad bipartisan support when considered on the floor by the Senate.

Over the summer, senators overwhelmingly approved an amendment on a 91-6 vote that would have created an outbound investment screening program led by the Treasury Department in coordination with the Commerce Department. The measure would have required U.S. entities to notify the government of investments and activities in specific technology sectors in countries of concern, although the Senate’s underlying version of the NDAA ultimately stalled at the time.

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The Senate in July voted 91-6 to approve an amendment requiring screening of outbound investments in adversarial countries like China. (Photo by Jakub Porzycki/NurPhoto via Getty Images / Getty Images)

The two leaders of the House Select Committee on the Chinese Communist Party, including Chairman Gallagher and Ranking Member Raja Krishnamoorthi, D-Ill., as well as 10 other members of the bipartisan panel signed onto the letter. House Foreign Affairs Committee Chairman Michael McCaul, R-Texas, and Ranking Member Gregory Meeks, D-N.Y., were also signatories.

A total of 19 senators signed the letter, including Sullivan and Senate Homeland Security Committee Chairman Gary Peters, D-Mich., and Senate Intelligence Committee Ranking Member Marco Rubio, R-Fla.