CFIUS in the Age of Chinese Investment

As China’s economy has developed, its companies, both state-owned and privately held, have moved to expand their operations in the United States to the point where many now seek to invest in—and on occasion, acquire—U.S. counterparts. This trend has set off alarm bells over fears that China’s unique political and economic system, which gives the state extensive influence over all corporations regardless of their ownership structure, renders such transactions national security threats. Recent hostility toward Chinese-led inbound investment is not a new trend; Congress has attempted to assert itself into the screening process undertaken by the Committee on Foreign Investment in the United States (CFIUS) since its establishment. This Note examines both the framework the U.S. government has utilized to screen potential national security threats posed by foreign investment and how the eccentricities of China’s state-capitalist system present unique challenges to that framework. It argues for an executive order to mandate CFIUS review for transactions in sensitive industries which touch upon national security issues, particularly telecommunications in an age of increasing cyberwarfare. This will prepare CFIUS to handle the challenges posed by increasing investment in the United States by Chinese corporations without needlessly constructing barriers to the same where no real security threat exists