New Legislation Addressing National Security Concerns

The Senate overwhelmingly backed legislation Tuesday that would require U.S. firms to notify the Treasury when investing in advanced Chinese technology, on the basis of national security concerns.

This is a toned-down version of the initial Outbound Investment Transparency Act introduced two years ago, which called for restricting investment but faced pushback.

The latest legislation, which does not require review or investment curbs, still needs to undergo a process before becoming law. It is one of several measures that lawmakers are rushing to clear ahead of a month-long recess in August.

The bill comes as President Joe Biden is expected to issue an executive order restricting U.S. investment in high-end Chinese tech.

An executive order could have a broader impact than the current legislation being considered.

The White House did not immediately respond to a request for comment after office hours.

The latest legislation passed the Senate 91-6 in a rare bipartisan agreement, highlighting U.S. concerns over China’s technological advancements in the global battle for supremacy.

The bill is an amendment co-sponsored by Sens. Bob Casey, D-Pa., and John Cornyn, R-Texas, and is part of the broader National Defense Authorization Act. The Senate is expected to vote on the defense act by the end of the week.

“When American companies invest in technology like semiconductors or AI in countries like China and Russia, their capital, intellectual property, and innovation can fall into the wrong hands and be weaponized against us,” said Cornyn.

“This bill would increase the visibility of these investments, which will help the U.S. gather the information needed to better evaluate our national security vulnerabilities, confront threats from our adversaries, and remain competitive on the global stage.”

Escalating Technological War

In October, the U.S. implemented strict rules to limit exports of key chips and semiconductor tools to China, and encouraged other chipmaking nations to do the same.

Japan recently joined the U.S. in restricting exports of semiconductor manufacturing equipment.

The Netherlands also announced new export restrictions on advanced semiconductor equipment.

U.S. Treasury Secretary Janet Yellen assured Chinese counterparts that any curbs on U.S. outbound investments would be “transparent” and “very narrowly targeted.”

China responded by imposing export curbs on chipmaking metals and compounds, claiming to have given advance notice to the U.S. and Europe.