1 September 2018
The Obama years may have allowed China to infringe on American global power, but under Trump, the tide is turning. As governments around the world watch China’s expanding reach with a sense of resignation, the president has signed into law a bill promising to restrict foreign investment in the U.S.
Under the Foreign Investment Risk Review Modernization Act, the U.S. government has added a powerful tool to block other countries — namely China — from buying up or funneling money into U.S. companies. This is directly protecting vital strategic assets and know-how.
The new investment law is a big step toward shielding the U.S. from dangerous Chinese intrusions on our home soil. Following the White House’s tougher stance on American global competitors, Chinese acquisitions and investments in America have already plummeted 92 percent to $1.8 billion in the first half of this year. The drop comes off the back of an already tough year for Chinese entities seeking to extend their tentacles into the U.S. following pressure from the Trump administration.
Such guardianship has been long awaited by those with an eye on national security: in 2015 and 2016, Beijing’s corporations went on an overseas acquisitions spree that concluded with multibillion dollar deals throughout the U.S. while the Obama administration stood idly by and let the buyout occur. U.S. intelligence has long classified Chinese firms as security risks, raising concerns that China is able to access technologies underpinning American military might and economic power. Now, with the investment law and the new National Defense Authorization Act prohibiting U.S. government agencies from using telecommunications and surveillance products from Chinese technology firms like ZTE and Huawei, their voices are finally codified into U.S. law.
The White House moves are a significant blow to Beijing’s foreign policy objectives. America has been a major destination for Chinese foreign direct investment (FDI) in the last decade, and the largest target of Chinese capital flows since 2005. But even if Chinese President Xi tirelessly touts the supposed benign nature of investments, don’t be fooled: such investments are a favorite, and more surreptitious, weapon in the Chinese arsenal than the military – a weapon China is employing freely given the country cannot compete with U.S. military might in terms of capabilities and global force projection.
But as it turns out, the Chinese strategy of encroaching on America’s geopolitical position and security interests in this way has already borne fruit. Massive FDI flows into allied countries and strategic regions have unambiguously exposed Beijing’s money as a pertinent threat. In a prime example of how easy it is to seize an entire country’s strategic infrastructure, China Three Gorges in May bid $11 billion to take over the entire capital of Portugal’s largest grid company, with subsidiaries in the U.S., Spain, and Brazil.
Beijing’s bid to bind Europe to itself extends also to the political realm. Following a billion-dollar deal involving the Greek port of Piraeus, China has been able to count on Greek support to divert EU criticism of Beijing’s behavior in areas from human rights to maritime security. The implications of Beijing’s encroachment are a direct threat to our security, because these maneuvers affect the sovereignty — and the reliability — of America’s supposed allies.
Similar scenes are also playing out across Africa, where China is the single largest investor by far. And the effects are already painfully felt. Chinese capital flows into strategic choke points like Djibouti are turning the country into a Chinese puppet whose intentions can no longer be trusted. The country is of vital importance to counterterrorism efforts, and is home to 4,000 American troops gathering key intelligence on al-Qaeda and Islamic State terror cells. Yet at the beginning of the year, the government of Djibouti lost a high-profile court case over the way it kicked out the operator of the country’s port — whose business was promptly handed out to a Chinese state-owned cargo company at around the same time as the takeover.
That’s a problem, since the Chinese have already built a military base a stone’s throw away from the Americans. With China looking for additional facilities to expand its presence, top U.S. military officials are warning of the “significant consequences” if China takes hold of the port facilities, since counterterrorism operations will suffer a massive blow.
All this shows that China is trying to undermine America’s global power status through money rather than military might. China’s reach is extending as wide as Beijing’s pockets appear deep, and Washington must act fast. Just as he has drawn red lines in the sand at home, Trump must draw red lines abroad when it comes to strategic Chinese investments. Otherwise, the consequences of the Obama era’s years of neglect will only give China more of an advantage.