November 20, 2018

Quad Restrictions: Addressing PRC Investment Concerns in the Indo-Pacific

Washington has recently taken a tougher tack to growing inbound investment from the People’s Republic of China (PRC) by strengthening the Committee on Foreign Investment in the United States (CFIUS), but its security partners in the PRC’s backyard have not all followed suit (US Congress, August 13, 2018).

In the United States, the primary concern is that the PRC is using foreign direct investment (FDI) as a Trojan horse: When PRC companies invest in critical sectors like energy, transportation, and communications in traditionally open economies, Beijing can gain access to critical technologies, data, and infrastructure it can use for military ends. Such investment can also set the ground for technology transfer—both licit and otherwise—and weaken longstanding alliances, put central governments at odds with their regional counterparts, and co-opt business interests as lobbyists for Beijing.

India, Japan, and Australia, America’s partners in the Quadrilateral Security Dialogue (the Quad), face the same national security threats as the United States, but not all have responded by strengthening scrutiny of inbound PRC investment. In addressing these issues, Japan, which has managed to allow some inbound investment without exposing itself to national security risks, can serve as a starting point for its Quad partners.

Read the full article in China Brief.

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