Shutterstock/CNNMONEY White House decides against outright limits on Chinese investment

White House decides against outright limits on Chinese investment

In a statement, President Trump said the new rules will help protect the US economy from foreign influence while maintaining a string environment for worldwide investment.

It comes as the USA and China both prepare to slap tariffs on $34bn worth of each others' goods.

The Trump administration will stick to a strengthened security review process to deal with threats from Chinese investments to acquire USA technologies instead of imposing China-specific restrictions, senior administration officials said on Wednesday.

"The president is unsatisfied with their response on the trade talks, and so he put out there the possibility of an additional tariff measure", Kudlow said, referring to China.

The US is planning to impose tariffs on US$34 billion of Chinese goods on Friday next week, an amount that could reach US$450 billion if China refuses to back down and retaliates with sanctions of its own. Each chamber has passed a version of the bill, which would expand on existing tools for the Committee on Foreign Investment in the United States (CFIUS).

CFIUS has already been more aggressive under Trump, especially on China.

The measure gives the Committee on Foreign Investment in the United States more power to review sensitive investments involving China, Russia and state sponsors or terrorism, allows reviews of land purchases near US military installations and ports and could stop key technology from being exported to China and other countries. "And we believe it will affect the competitiveness of the United States".

After days of declines and increased volatility amid fears of a worsening trade war, United States stocks rallied, with the benchmark Dow Jones Industrial Average up 0.9 per cent shortly after 1400 GMT, echoing the more optimistic sentiment in European markets.

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The House approved a bill this week to strengthen the CFIUS law, and a joint House-Senate conference committee on defense policy bill is expected to take up the matter as well.

David Dollar, the Obama administration Treasury Department's top economic emissary to China, called Trump's approach to China "chaotic" and said it left Beijing confused about his ultimate aims. "It's confused the Chinese about what the USA really wants".

The president can direct CFIUS to heighten scrutiny on sensitive technologies.

"At the end of the day, all the president's advisers were 100 per cent unanimous when we sat down with the president", Mnuchin said.

"If, in fact, President Trump is now backtracking on tough limits on Chinese investment, it is a VERY BIG MISTAKE", Republican Senator Marco Rubio said on Twitter just before Wednesday's announcement. "And to the extent that we were anxious about transactions, we will block them".

President Trump's chief economic adviser Larry Kudlow, who returned to the White House two weeks after being hospitalized for a mild heart attack, is interviewing candidates for two positions on the National Economic Council (NEC) that will be vacated in July.

"Should Congress fail to pass strong FIRRMA legislation that better protects the crown jewels of American technology and intellectual property from transfers and acquisitions that threaten our national security - and future economic prosperity - I will direct my Administration to deploy new tools, developed under existing authorities, that will do so globally", Trump said in a statement.

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