General Discussion

The measure at issue is known as the “outbound investment” provision. We have heard for years about the problem of manufacturing businesses shipping jobs overseas to China, with its low worker wages and low environmental standards. China typically forces businesses wanting to locate factories in its country to transfer their technology and intellectual property to Chinese firms, which can then use that to undercut competitors in global markets, with state support.

Congress has been working itself into a lather about China for years now, and they finally came up with a way to deal with this issue. Sens. John Cornyn (R-TX) and Bob Casey (D-PA) have the flagship bill, which would either prohibit U.S. companies from investing in “sensitive technologies” in China, including semiconductors and artificial intelligence, or set up a broad notification regime around it.

The bill would add some reporting requirements and enhanced reviews as well; in general, it expands restrictions that the Treasury Department has already put forward in regulatory rules. Codifying those rules into statute means that they cannot be changed by successive administrations.

Cornyn-Casey passed the Senate last year, and after about a year of legislative wrangling, a final outbound investment package made it into the year-end bill. “We’re taking a necessary step to safeguard American innovation against bad actors and ensure our lasting dominance on the world stage,” Cornyn said in a statement.

Funny story: Elon Musk’s car company has a significant amount of, well, outbound investment. A Tesla Gigafactory in Shanghai opened in 2019; maybe a quarter of the company’s revenue comes from China. Musk has endorsed building a second Tesla factory in China, where his grip on the electric-vehicle market has completely loosened amid domestic competition. He is working with the Chinese government to bring “Full Self-Driving” technology to China, in other words, importing a technology that may be seen as sensitive. Musk has battery and solar panel factories that are not yet in China, but he may want them there in the future.

You can argue about whether the U.S. should be restricting investment in China. But it’s incontrovertible that a billionaire who has a bunch of investments in China and wants to make more all of a sudden disrupted a normal congressional process that was going to restrict that investment with a bunch of lies from his media platform. And lo and behold, when the new funding bill emerged, the outbound investment feature was dropped. In fact, all traces of provisions related to China were removed from the bill.