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Client Alert: Proposed Strategic Competition Act of 2021

by | Apr 21, 2021 | Business & Commercial Law, Greater China Practice, Ian Liao

April 12, 2021

Proposed Bill Seeks to Counter China’s Global Competition Ambitions

In directing the U.S. government to adopt a policy of “strategic competition” with China and the protection and promotion of “vital interests and values” of the United States, a new bipartisan bill, the Strategic Competition Act of 2021 was introduced in the US. Senate on April 8, 2021.  The proposal by Sen. Bob Menendez, D-N.J., and Sen. Jim Risch, R-Idaho, sets out a wide-ranging strategy for the U.S. to contain China’s global economic and hi-tech expansion.

The Senate Foreign Relations Committee Chairman Bob Menendez (D-N.J.) says in a released statement that, “this unprecedented bipartisan effort to mobilize all U.S. strategic, economic, and diplomatic tools for an Indo-Pacific strategy that will allow our nation to truly confront the challenges China poses to our national and economic security.”

The Senate Foreign Relations Committee is currently scheduled to discuss the legislation at a meeting on April 14th.

Many of the key elements of the proposed bill are not unexpected and cover issues that have been part of the U.S.-China dialogue in recent months:

  • U.S.’s diplomatic strategy for addressing challenges posed by the Chinese government and reaffirming America’s commitment to its allies and partners in the Indo-Pacific region and around the world;
  • Authorizing a broad range of human rights and civil society measures, including support for democracy;
  • Countering and confronting China’s predatory international economic behavior, and includes those tracking intellectual property violators, Chinese government subsidies, monitor Chinese use of Hong Kong to circumvent U.S. export controls, and track the presence of Chinese companies in U.S. capital markets;
  • Strengthening American competitiveness with investments in science and technology, global infrastructure development, digital connectivity, and cybersecurity partnerships, and reinforces U.S. efforts to counter Chinese Communist Party influence and malign operations; and
  • Calls for enhanced coordination and cooperation with allies on arms control in the face of China’s military modernization and expansion.

The new bill also calls for the Committee on Foreign Investment in the United States (CFIUS), an interagency committee chaired by the U.S. Treasury secretary and charged with reviewing foreign mergers, acquisitions, and other investments for national security concerns, to evaluate “foreign malign influence or espionage activities” directed at U.S. institutions of higher education.  In particular, it requires the review of “any gift to an institution of higher education from a foreign person, or the entry into a contract by such an institution with a foreign person,” where: (a) the value of the gift or contract equals or exceeds $1,000,000, (b) the institution receives more than one gift from or enters into more than one contract with the same foreign person during 2 consecutive years the value of which equals or exceeds $1,000,000, (c) the gift or contract relates to research, development, or production of critical technologies and provide the foreign person potential access to non-public technical information, or (d) it is a restricted or conditional gift or contract that establishes control.

On the same day that this proposed bill was announced, the Department of Commerce’s Bureau of Industry and Security (BIS) also added seven Chinese supercomputing entities to the Entity List for conducting activities that the U.S. believes to be contrary to its national security or foreign policy interests.  By being placed on the Entity List, these seven entities will require special permission for exports and imports from the United States.