Lawmakers in both the U.S. House of Representatives and Senate are examining ways to restrict Chinese investment in the United States by reforming national security reviews conducted by the Committee on Foreign Investment in the United States (CFIUS), a U.S. Government interagency committee. The prospects for statutory changes to CFIUS reviews appear greater now than at any time since the underlying statute was overhauled nearly a decade ago.

Congressional concerns about the national security risks of Chinese investment in the United States are not new, but, possibly encouraged by an administration critical of China on a variety of trade issues, Congress is now drafting legislation to directly address those concerns. According to a report in the Wall Street Journal, Senate Majority Whip John Cornyn (R-TX), the number two Republican in the Senate, is in discussions with Sen. Mike Crapo, Chairman of the Banking Committee, and Rep. Jeb Hensarling (R-TX), Chairman of the Financial Services Committee, on draft legislation requiring heightened CFIUS scrutiny of Chinese technology deals. According to the Journal, the administration favors giving CFIUS more latitude to recommend rejecting technology deals. Meanwhile, Senate Minority Leader Chuck Schumer (D-NY) is preparing a broader proposal that would require CFIUS to consider economic factors when reviewing foreign investments, a step that would fundamentally alter CFIUS’s national security mandate. To date, none of the proposals has been offered as legislation.

A key player to watch is Chairman Hensarling, as CFIUS legislation would move through his Financial Services Committee. Rep. Hensarling has historically been a free-market advocate who resists the government intervening to influence free market trade and investment. For example, he previously led efforts to oppose the renewal of Ex-Im Bank’s charter, arguing that the agency is a distributor of corporate welfare to big corporations. However, it is yet unclear whether these proposed CFIUS reforms will be viewed by Rep. Hensarling and others as predominantly free trade versus national security initiatives. In addition, some CFIUS skeptics like Rep. Rob Pittenger (R-NC) want a harder line toward China. Rep. Pittenger sits on the Financial Services Committee and has raised concerns about previous Chinese acquisitions of U.S. firms, such as the Chicago Stock Exchange. It is entirely possible that, in this political climate, Rep. Hensarling and other free-market Republicans would nevertheless support more expansive CFIUS review criteria having the effect of limiting foreign investment.