August 1, 2017 / 4:43 PM / 7 months ago

Top Senate Democrat urges Trump to block China deals over N. Korea

WASHINGTON (Reuters) - The top Democrat in the U.S. Senate on Tuesday called on President Donald Trump to block some Chinese investments in the United States in an effort to pressure China “to help rein in North Korea’s threatening and destabilizing behavior.”

In a letter to Trump, U.S. Senate Democratic leader Chuck Schumer urged the president to use his authority through the Committee on Foreign Investment in the United States, or CFIUS, to exert economic pressure on Beijing.

Schumer’s request comes amid increasing U.S. concerns about the threat of North Korea’s nuclear and missile programs. Trump has repeatedly urged China to rein in its ally North Korea.

Schumer called on Trump to use the inter-agency committee “to suspend the approval of all mergers and acquisitions in the U.S. by Chinese entities.”

“It is my assessment that China will not deter North Korea unless the United States exacts greater economic pressure on China,” Schumer wrote to Trump, a Republican. “The U.S. must send a clear message to China’s government.”

Led by the U.S. Department of Treasury, CFIUS reviews foreign acquisitions of U.S. companies on national security grounds and can take action on its own or refer cases to the president.

At least one prominent Republican, Senator John Cornyn, who is on the Senate Intelligence Committee, urged in June that CFIUS change how it does business because of China. His concern, however, was not North Korea but fear that China would close the technology gap between the U.S. and Chinese militaries.

In an interview with Reuters on Friday, the top U.S. counter-intelligence official suggested the Trump administration was already working on a plan for a more stringent CFIUS review process.

“We’re making significant progress on that, working with both sides of Pennsylvania Avenue and trying to take a hard look at the process,” said William Evanina, National Counterintelligence Executive, referring to the White House and Congress. “I think it’s going to look a lot different than it does now.”

Evanina, whose office oversees U.S. government efforts to counter spying, industrial espionage and other foreign intelligence threats, declined to be more specific but noted that China’s direct investment in the United States quadrupled from 2015 to 2016, to $48 billion annually.

Two U.S. officials told Reuters North Korea’s latest test of an intercontinental ballistic missile has shown Pyongyang may now be able to reach most of the continental United States.

North Korea fired a missile on Friday that experts said was capable of hitting Los Angeles and other U.S. cities and the United States and South Korea responded by staging a joint missile exercise.

Schumer’s plan to prohibit CFIUS from approving Chinese deals would be technically legal but would stretch the mandate of CFIUS, which is supposed to stop mergers or stock buys that pose a threat to national security, according to two CFIUS experts.

“What sounds like effectively a bar on Chinese investment that is being suggested is probably legal but quite different than the case-by-case process that CFIUS has used in the past,” said Stephen Heifetz of the law firm Steptoe & Johnson LLP who represents clients before CFIUS. “The U.S. government should consider the potential for a Chinese response.”

The task force is facing this year what could well be a record number of deals, many of them controversial as Chinese firms scout U.S. targets as varied as hotels and film studios as a hedge against a weaker yuan.

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