Biden Orders Deeper Scrutiny of Foreign Investment in Tech and Supply Chains

Thursday’s executive order focuses on foreign investment in the U.S. and is meant “to ensure that Cfius remains an effective tool to combat these threats now and in the future,” the White House said in its explanation of the order.

A particular concern cited is the security of supply chains and whether an investment might give a foreign entity control of critical manufacturing capabilities, mineral resources or technologies.

While the order doesn’t single out particular foreign countries, an explanation of the measure provided by the White House mentions the risks presented by foreign investors from “competitor or adversary nations.” Its specifics—protecting supply chains, Americans’ data and technologies like semiconductors, artificial intelligence and biotechnology—are areas where administration and other U.S. officials have previously raised concerns about Chinese investment and espionage.

“Foreign investment is key to supporting American workers, businesses and growth in the United States,” an administration official said. “But…some countries exploit our open investment ecosystem to further their own national security priorities in ways that are directly contradictory to our values and interests.”

As part of its guidance, the order directs the committee to examine investments that could present cybersecurity risks, another area where China is active, and look for patterns to see if a foreign company or country is trying to acquire multiple firms within a sector.

Attempts by Chinese firms and investors to acquire U.S. semiconductor companies alarmed the Obama and Trump administrations, prompting increased vigilance over Chinese investment. As part of that, Congress in 2018 expanded the authority of Cfius, which is led by the Treasury Department, to examine deals, including by scrutinizing minority investments by foreigners via venture-capital funds—a tactic that some officials said China was using to circumvent attention.

The Biden administration is looking at closing off other channels that would give China access to American capital and know-how that might further Beijing’s ambitions to dominate cutting-edge technologies. National security adviser

Jake Sullivan

has warned about U.S. investment enhancing the technological capabilities of competitors, and the administration is considering an executive order to screen outbound U.S. investment in semiconductors and other technologies.

Some U.S. business groups such as the U.S. Chamber of Commerce and tech investors have raised concerns about the potential screening of overseas investment, saying that it may prove unwieldy or overly broad and undercut American economic influence and competitiveness.

Asked about that, the administration official said the White House is looking “at gaps in our existing tool kit, including whether it would be or is appropriate to look at some targeted and narrowly scoped requirements.”

China has previously objected to restrictions on Chinese investment in the U.S., calling such efforts unfair.

The order also directs Cfius to see if an investment would give the foreign investor access to Americans’ sensitive data and whether the investor has ties to entities that have the ability to exploit that information to the detriment of U.S. national security.

Write to Charles Hutzler at [email protected]