Summary of “How China acquires ‘the crown jewels’ of U.S. technology”

At a hearing in January, Heath Tarbert, the Treasury Department assistant secretary overseeing CFIUS, testified that allowing foreign countries to invest in U.S. technology without making sufficient background checks “Will have a real cost in American lives in any conflict.”
After the Sept. 11, 2001, terrorist attacks, Congress renewed its interest in CFIUS, passing legislation that instructed the committee to consider a deal’s effect on “Homeland security” and “Critical industries,” a notable change, according to Rosenzweig, the DHS official who worked with CFIUS during the George W. Bush administration.
The committee’s staffing and resources have not kept pace with the growing workload, multiple people who work with CFIUS told POLITICO. While the Treasury Department has been hiring staffers and contractors to help handle the record workload, the committee’s overall resources are subject to the whims of the individual agencies involved in the process, said Stephen Heifetz, who oversaw the CFIUS work at DHS during the second Bush administration.
The most common foreign investor that hits the CFIUS radar is now China.
In March, Trump blocked the purchase of the chipmaker Qualcomm by Singapore-based Broadcom Ltd. CFIUS said such a move could weaken Qualcomm, and thereby the United States, as it vies with foreign rivals such as China’s Huawei Technologies to develop the next generation of wireless technology known as 5G. To national security leaders CFIUS is still only scratching the surface of China’s ambitions to acquire U.S. technology, noting that traditional sale-and-purchase agreements to obtain a U.S. company aren’t the only ways to gain access to cutting-edge technology.
Traditionally, courts have defined control of a company as “The ability to direct management to make certain decisions.” But a former Treasury Department official said CFIUS needs to focus on “Beneficial ownership,” defined as having the ability to obtain technology from the firm, rather than overall decision-making power.
A sharper focus on bankruptcy cases, particularly in making sure CFIUS scrutinizes investors to ties to foreign governments, is desperately needed, said a former Pentagon official who is still involved in CFIUS cases.
Lengthening the CFIUS review time – currently 30 days, but set to extend to 45 days under the new bill – could damage the “Brittle process” of early-stage fundraising, said Nicholson, who encouraged lawmakers to focus on expanding CFIUS powers in other areas, such as bankruptcy courts.

The orginal article.