Rep. Mike Gallagher (R-WI), chairman of the House Select Committee on China, and other congressional members have penned a letter to President Joe Biden, expressing concerns over the draft executive order expected to restrict U.S. capital investment in critical technologies being developed in the People’s Republic of China (PRC).

Addressing The Risks

Rep. Gallagher acknowledges the necessity of addressing outbound investment but urges the president to adopt core principles that would tackle the national security issues at hand with the required urgency, clarity, and breadth.

He highlights the significant national security risk posed by U.S. investments in the PRC, which also expose Americans to financial risks and potentially implicate them in human rights abuses.

According to the American Enterprise Institute, over $200 billion of U.S. capital is invested in PRC companies through private markets, while over $1.1 trillion of American capital is invested through public markets in PRC stocks and bonds. This includes companies like Alibaba Group Holding Ltd (NYSE:BABA) and Tencent Holdings Ltd (OTC:TCEHY).

A considerable portion of this investment directly finances PRC technology companies with documented connections to the Chinese military and the Chinese Communist Party’s (CCP) human rights abuses.

Call for Transparency And Restrictions

Despite the clear risks, Rep. Gallagher points out that there is currently no mechanism for the U.S. Government to require disclosure of, or much less restrict, outbound capital flows to such foreign adversary companies. He urges the president to take meaningful first steps towards effective and balanced outbound investment rules.

He calls for transparency and a full accounting of total U.S. risk exposure and the final beneficiaries of U.S. investment in the PRC.

Gallagher also suggests that U.S. outbound investment rules should restrict problematic investments, guided by several core principles. This includes addressing both private and public market investments, restricting investments in sectors relevant to national security, safeguarding shareholder rights, providing certainty and predictability to investors and companies, and consulting allies and partners in advance.

“For too long, America has funded the China Communist Party (CCP)’s military buildup, technological ambitions, and human rights abuses and allowed the CCP unconstrained access to our capital markets and the dynamism and efficient capital allocation that they enable,” the chairman wrote.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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