Recent congressional efforts to establish new authorities to regulate outbound investment have revived a long-simmering debate in Washington about the economic and security risks associated with US investment in China. The stakes for rethinking the investment relationship between the United States and China are high. China is the world’s second-largest economy and second-largest destination for foreign investment, after the United States. US firms have $118 billion in investments there. While foreign companies are increasingly pessimistic about the geopolitical risks associated with operating in China, the majority intend to stay in the market.
Sarah Bauerle Danzman, an associate professor of international studies in the Indiana University Hamilton Lugar School of Global and International Studies, co-authored a new report that makes several policy recommendations to address concerns about U.S. investments abroad.
“It’s clear that there is strong appetite in DC for outbound controls,” Bauerle Danzman said. “Doing so in a way that is targeted and doesn’t create major unintended consequences will be hard.”
To ensure that new authorities are consistent with the United States’ commitment to open markets, support the global competitiveness of US business, and can be implemented effectively, an outbound investment mechanism must be narrowly targeted, clearly defined, non-duplicative of existing tools, scoped proportionately to administrative capacity, and paired with meaningful multilateral engagement with allies and partners.