FY24 NDAA should maintain disclosure requirements and restrict U.S. capital flows to China

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Coalition Letter: Outbound Investment Restrictions

In a coalition letter released today, a wide range of conservative leaders and organizations called for Congress to include outbound investment restrictions in the FY24 National Defense Authorization Act (NDAA). The letter specifically urges Congress to retain the Outbound Investment Transparency Act in the final NDAA. The coalition argues that predictability, efficiency, and efficacy all require broad, robust prohibitions on U.S. capital flowing to sensitive industries and technologies in China, not merely sanctions, and calls on Congress to include the Outbound Investment Transparency Act‚Äôs transparency and disclosure regime as a critical step in that direction. 

Spearheaded by American Compass and the Heritage Foundation, the letter is signed by: Chris Griswold (American Compass); Victoria Coates (Heritage Foundation); Thomas J. Duesterberg* (Hudson Isnstitute); Joseph Miller (Citizens for Renewing America); Michael A. Needham (America2100); Jon Toomey (Coalition for a Prosperous America); the Honorable Steve Yates (America First Policy Initiative).

The full text of the letter is as follows:

Dear Speaker Johnson, Leader Jeffries, Leader Schumer, and Leader McConnell:

As the FY2024 National Defense Authorization Act (NDAA) moves through conference committee, we write to urge Congress‚Äôs support for security-related restrictions on outbound investment of American capital to the People‚Äôs Republic of China (PRC). Many outbound investments into China are jeopardizing our national security by accelerating sensitive dual civilian and military technology development for the PRC, thereby strengthening its military, intelligence, surveillance, and security capabilities.

Some in Congress incorrectly argue that restricting such investments will impede the economic growth produced by adhering to free market principles. House Financial Services Chairman Patrick McHenry, for example, has argued that ‚ÄúIf we oppose China‚Äôs state-run economy, we want more private investment‚ÄĒnot less. Of those private investors, we want more of them to be Americans‚ÄĒnot fewer. And if we are truly concerned by China‚Äôs technology companies, we want as many Americans as possible steering them, spreading Western standards, and complying with U.S. laws.‚ÄĚ

This argument does not apply to a state-controlled economy like China‚Äôs, where businesses succeed only at the pleasure of the Chinese Communist Party (CCP).1https://americancompass.org/halting-investment-in-china/ We regularly observe how the PRC cajoles American businesses into advancing CCP interests and values, from Hollywood studios and professional sports leagues preserving their market access by self-censoring, to major American companies promising to uphold ‚Äúcore socialist values.‚ÄĚ2https://www.foxbusiness.com/technology/tesla-commits-promoting-core-socialist-values-pledge-chinese-auto-companies It is both unwise and unconscionable to finance the capabilities of an adversary hostile to American interests and values.

Recognition of the risks associated with U.S. investment flowing to the PRC is growing. In his letter of August 3, 2023, Chairman Mike Gallagher of the Select Committee on the Strategic Competition between the United States and the Chinese Communist Party warned that much of the more than $1 trillion that the U.S. invests in the PRC through public markets ‚Äúdirectly finances PRC technology companies with documented connections to the Chinese military and the Chinese Community Party‚Äôs (CCP) abhorrent human rights abuses.‚ÄĚ3https://d1e00ek4ebabms.cloudfront.net/production/uploaded-files/Letter%20on%20Outbound%20Investment%20Executive%20Order%20(1)-217afaea-9782-4ff9-ac4b-d51b5ef62cbe.pdf President Biden‚Äôs recent Executive Order 14105 of August 9, 2023 purports to speak to this concern, as do numerous legislative proposals. On July 25, 2023, the Senate voted 91‚Äď6 to include in the FY24 NDAA the Outbound Investment Transparency Act, which would require notification of U.S. investments in key industries in foreign countries of concern.

Congress must establish sensible restrictions on U.S. capital flowing to sensitive industries and technologies in China. As a starting point, the FY24 NDAA must maintain the Senate‚Äôs approach of establishing a disclosure and transparency regime for high-tech investments. Building on that foundation with meaningful restrictions in further critical technology sectors would be an even better outcome for American national security.

Nor should Congress accept any attempt to substitute sanctions for outbound investment screening. Opponents of meaningful restrictions on outbound investment into China have argued that additional sanctions authorities are an acceptable alternative, despite the continuing lax enforcement of even mandatory sanctions towards China. While we strongly support enhancing and more sensibly harmonizing the U.S. sanctions regime, sanctions alone are piecemeal and backwards-looking, rather than comprehensive and preventative. Predictability, efficiency, and efficacy all favor broad, robust prohibitions as the default. Specifically, the Committee-passed Chinese Military and Surveillance Company Sanctions Act should not replace the Outbound Investment Transparency Act.

Congress cannot allow American investment‚ÄĒincluding the investment of millions of average Americans‚Äô retirement funds4https://www.wsj.com/articles/blackrock-msci-face-congressional-probes-for-facilitating-china-investments-2147ce2c‚ÄĒto bankroll threats to America‚Äôs national security, the erosion of America‚Äôs technological edge, and the violation of our nation‚Äôs essential commitments to freedom and human dignity. Congress works for the American people, not Wall Street.5https://www.dailysignal.com/2023/10/20/were-in-a-new-cold-war-with-china-its-time-our-politicians-acted-like-it/ As the FY24 NDAA is finalized, it must retain the Outbound Investment Transparency Act.


Chris Griswold                                                     
Policy Director                                                      
American Compass

Victoria Coates
Vice President 
Davis Institute for National Security and Foreign Policy
The Heritage Foundation

Thomas J. Duesterberg*
Senior Fellow
Hudson Institute

Joseph Miller
Executive Director
Citizens for Renewing America

Michael A. Needham
Executive Director

Jon Toomey
Senior VP of Government Relations
Coalition for a Prosperous America

The Honorable Steve Yates
China Policy Initiative
America First Policy Institute

*Affiliation provided for identification purposes only.

Read the Letter
Coalition Letter: Outbound Investment Restrictions

As the FY2024 National Defense Authorization Act (NDAA) moves through conference committee, we write to urge Congress’s support for security-related restrictions on outbound investment of American capital to the People’s Republic of China (PRC).