Mnuchin denies reports on limits of tech to China

Treasury chief’s comments conflict with White House

Hans Dietmar Schweisgut (left), European Union ambassador to China, and European Commission Vice President Jyrki Katainen leave a news conference in Beijing on Monday after the EU’s governing body said Europe and China will form a group to update global trade rules to address technology policy.
Hans Dietmar Schweisgut (left), European Union ambassador to China, and European Commission Vice President Jyrki Katainen leave a news conference in Beijing on Monday after the EU’s governing body said Europe and China will form a group to update global trade rules to address technology policy.

WASHINGTON -- Trump administration officials are denying reports that the United States is readying limitations this week on Chinese investment in American technology companies and high-tech exports to China. But the White House itself earlier announced plans to unveil the restrictions by Saturday.

Treasury Secretary Steven Mnuchin said on Twitter on Monday that reports by The Wall Street Journal and Bloomberg news are "false, fake news. The leaker either doesn't exist or know the subject very well" and that any restrictions would not be aimed solely at China but at "all countries that are trying to steal our technology."

Mnuchin's comment contradicts a May 29 White House statement, which said that "to protect our national security, the United States will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology." It said the controls would be announced by June 30 and would "be implemented shortly thereafter."

Further confusing matters, White House trade adviser Peter Navarro told CNBC on Monday that "there's no plans to impose investment restrictions on any countries that are interfering in any way with our country. All we're doing here with the president's trade policy is trying to defend our technology when it may be threatened."

Talk of investment restrictions knocked the Dow Jones industrial average down 328.09 points, or 1.3 percent, to 24,252.80 -- though the Dow recovered from deeper losses after Navarro's comments.

The Trump administration accuses Beijing of predatory practices in its attempt to supplant U.S. technological dominance, including cybertheft and forcing U.S. companies to turn over technology in exchange for access to China's market. It is planning to impose tariffs on $34 billion in Chinese goods July 6 -- a figure that could rise to $450 billion if China refuses to back down and retaliates with sanctions of its own.

In Beijing, China's foreign ministry expressed concern over the reports that Trump plans to curb Chinese investments in the United States, and urged Washington to provide a "good, fair, and predictable" environment for Chinese companies.

"We hope the U.S. side will see these [Chinese] companies' business activities in an objective manner, and provide Chinese companies a good, fair and predictable environment for their investment and business activities," Foreign ministry spokesman Geng Shuang said.

The Wall Street Journal, citing unidentified sources, said the initiatives were aimed at preventing Beijing from moving ahead with plans to develop companies able to compete globally in technologies including biotech and electric vehicles.

Mnuchin, in the report scheduled to be released Friday, will suggest administering the restrictions through an inter-agency government panel called the Committee on Foreign Investments in the U.S., or CFIUS, according to eight people familiar with the plans, requesting anonymity to discuss the plans.

One concept under review would be to create a two-tracked committee process to review investments, with one specifically for China, two of the people said.

The restrictions would be imposed under the International Emergency Economic Powers Act of 1977. They would target prospective investments, meaning existing ones cannot be undone, according to four of the people. It's unclear what would happen to deals that have been announced but not yet completed. Treasury officials are trying to settle on the legal definition of "Chinese entities" that would be affected.

China's Ministry of Commerce didn't respond to Bloomberg's inquiry about the report of planned investment curbs from the U.S. At a regular briefing in Beijing on Monday, foreign ministry spokesman Geng Shuang said China wants the U.S. to treat commercial activities objectively and pointed out that Chinese investment has created a lot of jobs and tax income in the U.S.

"It is now clear that Trump's policy is not about the trade deficit," said Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd. in Hong Kong. "Security risks can be applied to every aspect in a bilateral relationship, investment restrictions in particular."

Following talks Monday in Beijing, Vice Premier Liu He -- President Xi Jinping's top economic adviser -- said China and the European Union had agreed to defend the multilateral trading system. They vowed to oppose protectionism and unilateralism, saying those actions could push the world into recession in an apparent rebuke to the U.S.

But despite their alignment against the U.S. trade threat, the EU and China remain at odds over issues including the lack of reciprocal access for European firms and the EU's reluctance to endorse China's Belt and Road trade and infrastructure program. As China steps up its engagement in Europe, the EU, too, is working on measures to tighten screening of outside investments to protect critical technologies and infrastructure.

A survey released last week by the European Union Chamber of Commerce in China showed that a slim majority of members thought foreign-invested companies are treated unfairly, and almost two-thirds see a lack of reciprocity between the access to China's markets that they get, and the access Chinese companies get to Europe.

China and the EU will exchange offers related to market access at an upcoming summit in July, Liu said Monday. He also said both sides agreed to connect the Belt and Road initiative to the EU's development strategies.

The EU and China agreed to set up a working group to update the WTO to better equip it for the contemporary world, Katainen said at a press conference late Monday in Beijing. While the details have yet to be decided, the EU hopes the working group is at vice-minister level, he said.

Information for this article was contributed by The Associated Press, by Saleha Mohsin and Jenny Leonard of Bloomberg News.


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