Top Senate Democrat Urges President Trump to Block All Chinese Deals
August 2, 2017
Following the launch of two intercontinental ballistic missiles by North Korea in July, the United States is looking to ratchet up pressure against Kim Jong Un’s largest trading partner…China. President Donald Trump and U.S. lawmakers believe China is not doing enough to rein in North Korea’s dangerous behavior. Over the weekend, President Trump tweeted that, “they [China] do NOTHING for us with North Korea, just talk. We will no longer allow this continue. China could easily solve this problem.” The top Senate Democrat is now urging President Trump to consider an alternative recommendation to increase economic pressure on China.
While the State Department is looking to target more Chinese entities that support North Korean businesses, Senate Minority Leader Chuck Schumer (D-NY) has another idea. In a letter to President Trump yesterday, Senator Schumer requested that the President use his unilateral authority to block all Chinese deals through the Committee on Foreign Investment in the United States (CFIUS) until China works to curb North Korea’s aggression. “If China does not change its posture, the U.S. should take clear and firm action to seek to ensure China’s cooperation,” wrote Schumer. “Suspending Chinese firms’ ability to acquire companies in the U.S. would be one such action.”
As mentioned in our July 11 CFIUS Insight piece, Republican lawmakers are planning to introduce legislation to require more thorough reviews of Chinese acquisitions of U.S. companies, particularly involving critical technologies and infrastructure. However, unlike Senator Schumer’s approach, Republicans have emphasized that changes would narrowly focus on national security as compared to trade barriers or economic reciprocity.
FTI Consulting’s Takeaway
Senator Schumer’s letter to President Trump reaffirms the growing politicization of the CFIUS process. Gridlock in the legislative process has forced lawmakers to pursue other mechanisms to influence the public policy debate, such as press conferences, congressional letters, and oversight hearings. The Dubai Ports World controversy is just one example of how public opposition can translate into ultimate deal failure.
Senator Schumer’s letter also reaffirms growing bipartisan agreement for more rigorous scrutiny of Chinese deals. Since Republicans and Democrats agree on reforming CFIUS and getting tough on China, Trump could work with Schumer on this issue, which could have the added benefit of alleviating partisan tension over healthcare repeal. After all, Trump will need to work with Senate Democrats to pass other important policy issues such as a debt ceiling hike and an infrastructure overhaul.
While it is unlikely that President Trump will use his executive authority to block all Chinese deals, he could nonetheless become more vocal on specific transactions involving CFIUS review. For example, by citing national security concerns on Chinese transactions, Trump could significantly weaken the likeliness of deal approval — thus harming China’s FDI strategy.
Regardless of whether President Trump takes executive action, there will be no shortage of public dialogue around CFIUS. MNCs interested in cross-border M&A must not just have a good legal strategy, but also a comprehensive campaign that includes communications, public affairs, and government relations strategies that will empower them to address political concerns as part of any CFIUS impacted M&A advocacy plan.
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