A U.S.-China economic and security review commission 2021 report urges Congress to address the risks imposed by Chinese investments, according to the Center for Strategic and International Studies (CSIS).
"Investment should be able to proceed in areas where there isn't a threat of compromising our future economic security,” Dr. Robin Cleveland, vice chair of the 2021 Annual Report Cycle for the U.S. China Economic and Security Review Commission, said. “It becomes really tough when it comes to the financial sector. Because what we have historically seen is China opening up its markets, because it needs the investment for some specific growth target. The financial, large financial institutions are coming into China right now, moving into China. And it becomes a little murkier as to how they're going to contribute to China's advancement.”
While the Chinese Communist Party (CCP) allows foreigners to invest in Chinese companies, they do not have a say in where and how those funds will be allocated as the right is directly reserved to the government. In some cases, the regime may be used to advance China's military modernization and the country's national development objectives, according to the report.
"We don't want to finance our enemies, or our adversaries,” Cleveland said. “We don't want to finance companies that may very well develop a capability, whether it's cyber or military, to target the United States. So, there is an element of concern about where American investors and investment, and resources are going. They want access to global resources. They want access to global markets, and they don't want us to have access to their markets.”
The occurrence is expected to continue as American investors are influenced by and steered toward Chinese markets by index fund providers. According to the report, the funds "have played a pivotal yet unregulated role in guiding foreign portfolio investment toward Chinese companies," thus complicating the challenge that the U.S. government faces.
The expert also raises the possibility of drawing "a clear line, as Japan and Korea have, when it comes to advanced technologies, but money's a different proposition,” Cleveland said. “And how are we contributing to the wellbeing and the survival of the CCP is a big question."
The report recommends that "Congress consider comprehensive legislation to ensure Chinese entities sanctioned under one U.S. authority be automatically sanctioned under other authorities unless a waiver is granted by the president or the authority applying the initial sanction."