Sarah Bauerle Danzman, an expert on US-China economic relations, recently testified before the US-China Economic and Security Review Commission on outbound investment from the United States to China. She provided descriptive data showing that the United States is the primary overseas investor in China, mostly through venture capital, although the volume of these flows has declined in recent years [58b21f7c].
Danzman discussed the four key components of the executive order on regulating certain types of US investment to China that she believes are important to maintain. She emphasized the importance of maintaining outbound regulation as a notification/prohibition regime and endorsed a sector-based approach to outbound investment regulation. She also recommended providing a statutory basis for the NS-CMIC list, which identifies Chinese entities operating in sectors important to US national security [58b21f7c].
In terms of implementation challenges, Danzman highlighted three key questions. First, she discussed the need to clarify the definition of "routine intracompany actions" to ensure that the rule does not allow for material expansion or operational pivots into covered activities. Second, she recommended including an intangible benefits test in Treasury's final rule for implementing the executive order. Finally, she suggested modifying the CMIC program to authorize the designation of Chinese entities beyond the current scope and to include any Chinese entity operating in sectors important to US national security [58b21f7c].
Danzman also made several recommendations to Congress. She urged Congress to refrain from adding non-national security-related tests to any legislation related to outbound investment regulation. She also recommended that Treasury's final rule for implementing the executive order include an intangible benefits test. Additionally, she emphasized the need to further clarify "routine intracompany actions" and ensure that the rule does not allow for material expansion or operational pivots into covered activities. Finally, she recommended modifying the CMIC program to authorize the designation of Chinese entities beyond the current scope and to include any Chinese entity operating in sectors important to US national security [58b21f7c].