What happened: The U.S.-China Economic and Security Review Commission released its 2024 report to Congress today.
The Commission makes several recommendations to policymakers, including to:
- Pass legislation to eliminate the treatment of carried interest and the preferential capital gains tax rate for investments in certain Chinese companies.
- Create an Outbound Investment Office within the executive branch to oversee investments into countries of concern, including China.
- Collect more data on investment flowing into China by requiring the Treasury and Commerce Departments to publish deeper breakdowns of U.S. direct and portfolio investment.
- Require prior approval and ongoing oversight of Chinese involvement in U.S. biotechnology companies.
Why it matters: The Commission’s sole responsibility is to submit this annual report to Congress and does not have legislative authority. However, the report may increase bipartisan support in Congress to pursue more aggressive action to curb investments in China and countries of concern.
MFA on the issue: MFA remains actively engaged with Congress, Treasury, and the White House to discuss the potential unintended consequences of investment restriction policies.
What’s next: Congress may use the FY2025 National Defense Authorization Act (NDAA) to create a review program for outbound investments in China. Momentum is growing during the lame-duck session for the House of Representatives to take up additional legislation regarding China, including potential investment restrictions. China policy will remain a priority for policymakers in the next Congress.
