Biden Administration Tightens Grip on Foreign Investments Near Military Bases, Targeting Chinese Investments
In a move aimed at bolstering national security, the Biden administration is proposing a significant expansion of its powers to block foreign investments in the United States. This proposal specifically targets land purchases in close proximity to military installations, potentially making it more difficult for Chinese companies to establish factories within the country. The Treasury Department is seeking to add over 50 military bases across 30 states to the list of locations deemed sensitive to national security under the Committee on Foreign Investment in the United States (CFIUS), significantly expanding the committee’s authority to review and potentially block real estate transactions.
Key Takeaways:
- Broadened Authority: The proposed rule designates a significantly larger area around military bases as under review for foreign investments, extending the radius for scrutiny to within one mile of 40 additional installations and within 100 miles of 19 new military bases.
- Increased Scrutiny of Chinese Investments: This move follows growing concerns among both Democrats and Republicans in Congress regarding the potential national security threats posed by Chinese investments in the U.S. Critics argue that Chinese companies could use access to sensitive information or strategically placed facilities to undermine American interests.
- Beyond Chinese Investments: While the rule could significantly impact Chinese investments, the Treasury Department insists the expanded authority is not targeted at any specific nation and is a result of a thorough review of CFIUS’s jurisdiction.
- States Stepping Up: As the federal government faces criticism for perceived leniency towards foreign investments, numerous states have independently taken steps to curb Chinese investments, with Florida enacting the most restrictive legislation, effectively prohibiting most Chinese citizens without green cards from purchasing residential property.
A New Era of Investment Scrutiny
The proposal to expand CFIUS’s authority comes amid a backdrop of increasing tension between the United States and China. The Biden administration has implemented new tariffs on Chinese goods, including electric vehicles and solar panels, reflecting a strategic shift towards a more competitive approach. The addition of Camp Grayling, a National Guard training facility in Michigan, to the list of sensitive sites is particularly noteworthy, given the ongoing debate surrounding the construction of a $2.4 billion electric vehicle battery plant by Gotion, a Chinese company, near the facility. Local residents have expressed concern about the plant’s proximity to the base.
While the proposed rule will not apply retroactively to past transactions, it could create hurdles for future expansions or acquisitions related to existing projects. The rule’s potential impact on the Gotion project, which has already sparked significant local opposition, remains unclear.
The Treasury Department maintains that the expanded authority is not targeted at any specific country and is a result of a long-term review of CFIUS’s jurisdiction. However, the timing of the proposal amidst rising geopolitical tensions and a concerted effort to curb Chinese investment in strategically important sectors, suggests a broader approach to national security considerations.
Experts weigh in on the potential impact of this significant shift:
- J. Philip Ludvigson, a partner at the law firm King & Spalding, specializing in national security risks related to foreign direct investment: “This is really significant insofar as it shows that the Department of Defense is taking a more aggressive posture and is becoming more risk averse about property around military installations.”
- John Kabealo, a Washington-based lawyer who specializes in cross-border transactions: “The effect of the real estate transactions as they were articulated in their original form has been relatively minimal… The Treasury Department is likely expanding the list of military installations because CFIUS has not been able to scrutinize certain real estate transactions that have raised questions."
The proposed regulations highlight a growing trend of increased scrutiny of foreign investment in the United States. While the Biden administration insists the move is not specifically targeted at China, the timing and potential impact on Chinese companies’ ability to invest in the U.S. cannot be overlooked.
This proposal marks a significant shift in the American approach to foreign investments, prioritizing national security concerns over economic considerations. The evolving landscape of investment regulation, coupled with the increasing geopolitical tensions, could have far-reaching consequences for both domestic and international businesses operating in strategically important sectors.
