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Congress should make the Department of Defense (DOD) a CFIUS co-chair with the Department of Treasury. Making DOD an official CFIUS co-chair along with Treasury will establish a balanced committee process by elevating national security interests to an equal stature. The committee is currently imbalanced toward the interests of corporate America because Treasury is the sole chair of CFIUS and, in practice, runs a process that is not fully transparent and which biases it from the national security interests represented by DOD and the Intelligence Community (IC).

For example, Treasury representatives will consult with the Commerce Department and the United States Trade Representative—which tend to favor permitting covered transactions to occur with little to no mitigation requirements—and these representatives will then obscure the results and purposes of such sidebar meetings from DOD and IC representatives. This hampers DOD, IC, and sometimes even State Department representatives from full participation in the process or from advocating national security interests as well as they should.

Greenfield Investments. Congress should close the loophole on greenfield investments and require CFIUS review of investments in U.S.-based greenfield assets by Chinese-controlled entities to assess any potential harm to U.S. national and economic security. In the 2018 Foreign Risk and Review Modernization Act (FIRRMA),* one important category of foreign transactions left out of the bill was greenfield investments, particularly by Chinese state-owned enterprises (SOEs). Greenfield investments by Chinese SOEs pose a unique threat, and they should be met with the highest scrutiny by all levels of government.

Greenfield investments result in the control of newly built facilities in the US., and they were not addressed in FIRRMA primarily because governors and state governments embrace them. That is understandable; they typically bring the promise of creating American jobs. However, the goal of such Chinese SOEs is to siphon assets, technological innovation, and influence away from U.S. businesses in order to expand the global presence of the Chinese Communist Party. While the Chinese government keeps its domestic markets largely insulated from foreign influence, it regularly invests in the U.S. and other countries under the “greenfield” model. Firms fully owned by China’s Communist regime are increasingly buying land, building factories, and taking advantage of state and local tax breaks on American soil.

Treasury should examine creating a school of financial warfare jointly with DOD. If the US. is to rely on financial weapons, tools, and strategies to prosecute international defensive and offensive objectives, it must create a specially trained group of experts dedicated to the study, training, testing, and preparedness of these deterrents. Recent experience has demonstrated that the U.S. cannot depend on the rapid development and deployment of untested, academically developed financial actions, stratagems, and weapons on an ad hoc basis.