U.S. plans limits on Chinese investment in U.S. technology firms

[June 25, 2018]  By David Lawder and David Shepardson

WASHINGTON (Reuters) - The U.S. Treasury Department is drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with "industrially significant technology," a government official briefed on the matter said on Sunday.

The official, whose comments matched a report by the Wall Street Journal, emphasized that the Chinese ownership threshold may change before the restrictions are announced on Friday.

The move marks another escalation of President Donald Trump's trade conflict with China, which threatens to roil financial markets and dent global growth.

Tariffs on $34 billion worth of Chinese goods, the first of a potential total of $450 billion, are due to take effect on July 6 over U.S. complaints that China is misappropriating U.S. technology through joint venture rules and other policies.

The Treasury investment restrictions are expected to target key sectors, including several China is trying to develop as part of its "Made in China 2025" industrial plan, the U.S. official said.

Among its objectives, the plan aims to upgrade China's capabilities in advanced information technology, aerospace, marine engineering, pharmaceuticals, advanced energy vehicles, robotics and other high-technology industries.

The Wall Street Journal also said the U.S. Commerce Department and National Security Council were proposing "enhanced" export controls to keep such technologies from being shipped to China.

Spokespersons for the Treasury, Commerce Department and the White House did not immediately respond to Reuters' requests for comment on the proposed restrictions.

A Chinese woman adjusts a Chinese national flag next to U.S. national flags before a Strategic Dialogue expanded meeting, part of the U.S.-China Strategic and Economic Dialogue (S&ED) held at the Diaoyutai State Guesthouse in Beijing, July 10, 2014. REUTERS/Ng Han Guan/Pool

The government official said the Treasury would invoke the International Emergency Economic Powers Act of 1977 (IEEPA) to devise the restrictions.

The act gives the president sweeping authority to restrict assets based on national security concerns. IEEPA was invoked broadly after the 9/11 attacks in 2001 to cut off financing for terrorist networks.

The Journal said the administration would look only at new deals and would not try to unwind existing ones, adding that the planned investment bar would not distinguish between Chinese state-owned and private companies.

The White House on May 29 said the Trump administration would press ahead with restrictions on investment by Chinese companies in the United States as well as "enhanced" export controls for goods exported to China, with details to be announced by June 30.

It also said it would unveil a revised list of Chinese goods for tariffs, which it did on June 15.

(Reporting by Arshad Mohammed, Julia Harte, David Lawder and David Shepardson; Editing by Peter Cooney and Clarence Fernandez)

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