White House orders closer scrutiny of foreign investment for security risks

An executive order from US President Joe Biden directs foreign investment to be assessed for risks to national security. PHOTO: AFP

WASHINGTON - Foreign investment in the United States will be more strictly reviewed for evolving risks to national security, per an executive order from President Joe Biden.

Closer scrutiny will be paid to "where investments are coming from and who the investors are", a senior administration official told journalists on Wednesday.

The order directs the Committee on Foreign Investment in the US (CFIUS) to assess, in particular, risks related to supply chain resilience, leading edge technology and cyber security.

A fact sheet released by the White House said: "The order explicitly recognises that some countries use foreign investment to obtain access to sensitive data and technologies for purposes that are detrimental to US national security, and seeks to ensure that CFIUS remains an effective tool to combat these threats now and in future."

It added: "More broadly, this order explicitly ties CFIUS' role, actions, and capabilities with the administration's overall national security priorities." 

These include preserving the US' technological leadership, protecting Americans' sensitive data, and enhancing the country's supply chain resilience.

The executive order instructs the inter-agency committee to review investments "both within and outside the defence industrial base" for their impact on supply chain resilience and security.

Besides scrutinising the concentration of ownership or control by the foreign person in a particular supply chain, CFIUS will consider the extent of alternative suppliers across the supply chain, including suppliers located in allied or partner countries, and supply relationships with the US government.

CFIUS, which is chaired by Treasury Secretary Janet Yellen, will ensure "robust review" particularly of investment proposals from "competitor or adversarial nations", senior officials said on Wednesday.

Asked if the tightened scrutiny was aimed at investments from China, an official insisted that "there's nothing that's China-specific about this order, or CFIUS."

CFIUS conducts reviews on a transaction-by-transaction basis, "but (it) can also look at those cases with respect to systemic threats, systemic vulnerabilities, particularly with a focus on technology issues, supply chain issues".

CFIUS has been the target of criticism, most recently by Republican Senator Marco Rubio over its clearance of the sale of US-based semiconductor design company OpenFive to Toronto-based but apparently Chinese-funded company Alphawave.

"China is making an aggressive play to buy and steal US intellectual property," Senator Rubio warned last month.

In a statement, Ms Yellen said: "Among other things, the executive order enumerates sectors in which supply chain resiliency and US technological leadership face an increasing national security risk - including microelectronics, artificial intelligence, biotechnology, advanced clean energy, and critical materials."

Other sectors identified in the order were biomanufacturing, quantum computing, climate adaptation technologies, and elements of the agricultural industrial base that have implications for food security.

Foreign investment that shifts ownership, rights, or control to a foreign person in areas fundamental to national security may make the US vulnerable to future supply disruptions of critical goods and services, the fact sheet said.

Ms Yellen added that the order "sharpens the committee's focus on protecting America's national security, while maintaining the US open investment policy".

"It also reaffirms CFIUS's mission to protect America's technological leadership and the security of our citizens' sensitive data from emerging threats."

Join ST's Telegram channel and get the latest breaking news delivered to you.