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Mnuchin suffers a setback in the US plan to limit investments in China



The Trump administration's plan to implement some of the most restrictive investment limits in its economic arsenal against China marks a setback for Treasury Secretary Steven Mnuchin's effort to adopt a less confrontational approach to Beijing.

According to the plan, the White House would use one of the most expansive legal tools available to declare that China's investment in US companies involved in technologies such as new energy vehicles, robotics and aerospace constitutes a threat to national and economic security , according to eight people familiar with the plans.

Photographer: Andrew Harrer / Bloomberg

Mnuchin has been working on the plans since early December, but he systematically urged a less aggressive approach negotiated with the Chinese behind closed doors, people said. In the end, the president and other cabinet members persuaded him to use forceful tools to address the risks of Chinese investments, they said.

Some government officials are concerned that the restriction of Chinese investments on the basis of a supposed national economic emergency could "The commercial war of brewing

The measure would also fit with an internal memorandum of the European Union obtained by Bloomberg, which said that Trump's aggressive approach to the United States long-standing. " Alliances could relax decades of progress and force nations to return to a system where they could prevail.

It is a measure that would put Beijing's commercial brewing war on a potentially irreversible course, even when the Chinese authorities looked for ways to reach one with the United States

Mnuchin, in a report scheduled to be released On June 29, it will suggest the administration of that law. An inter-institutional government group called the US Foreign Investment Committee. UU or CFIUS, people said, requesting anonymity to discuss the plans.

A concept under review would be to create a two-way CFIUS process to review investments, with one specifically for China, two of the people said.

A Treasury spokesman did not respond to a request for comment.

Aggressive approach

The Treasury chief has maintained a low profile in recent weeks. People familiar with Mnuchin's thought said that after losing an internal battle over how to handle the trade dispute with Beijing, he has signaled his disagreement with the president's approach through silence.

Mnuchin lost a free trade ally earlier this year when Gary Cohn, Trump's first White House economic adviser, left the administration. Cohn, a former chairman of Goldman Sachs Group Inc., warned this month that trade disputes could eliminate the benefits of the Republican tax cuts approved in December. His successor, Larry Kudlow, is a self-proclaimed "free trader" and is recovering from a heart attack.

Following losing ground in the direction of US economic relations UU With China, a key description of the work of a US Treasury UU Secretary, Mnuchin has chosen silence in an effort to preserve his personal credibility with financial markets and even allies.

"Authorities around the world will see the secretary as the one to go for a reasonable, rational and reasonable conversation about the challenges facing each other or changes in the business cycle or multilateral policy changes," said Tim Adams, a former undersecretary of the Treasury in the George W. Bush administration. "They see it as something like a point of stability."

The United States, as the world's largest economy, may be the initial winner under such a regime, but a growing battle still presents downside risks.

Emergency Law

The national emergency law, called Emergen International The Economic Powers Act of 1977, will focus on prospective investments, which means that existing ones can not be undone, according to four of the people. It is not clear what would happen to the deals that have been announced but have not yet been completed. Treasury officials are also trying to come up with a legal definition of "Chinese entities" that will be affected.

Trump's chief commercial advisor to the White House, Peter Navarro, author of a book titled "Death for China" – has been laying the groundwork for scaling what is now called a "commercial dispute."

Navarro's office last week issued a 36-page report with the forceful title, "How China's economic aggression threatens the intellectual and intellectual property of the United States and the world." The report is considered part of the evidence that the administration will use to justify the limits on investment for economic security reasons.

& # 39; Economic Aggression & # 39;

Much of China's behavior "constitutes economic aggression," Navarro said last week during a conference call with reporters. "It is fundamental to both the interests of the United States and to integrity." and the proper functioning of the global economy for the Chinese to stop committing this type of behavior. "

The Treasury action is part of the actions of the Trump Section 301 administration to respond to the alleged theft of US intellectual property. And follow-up of rounds of tariff threats for each of the two largest economies.

The IEEPA statute allows the president to unilaterally impose investment limits.Congress, in parallel, is working on reform legislation to CFIUS that would analyze the incoming investment in the US For reasons of national security.

The investment limits of the Treasury are considered complementary. We are also looking at the CFIUS reform efforts, which not only focus on China and do not "limit investments for reasons of economic security," said people familiar with the administration's plans.

The limits of the Treasury will be extended in phases, which means that not all sectors made in China 2025 will be covered immediately, said people informed about the action this week. .

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