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Law360 (April 10, 2020, 4:22 PM EDT) -- Senate Armed Services Committee Chairman Jim Inhofe, R-Okla., and 17 other Republican senators urged President Donald Trump to use his authority to review Chinese investment in U.S. companies, saying that adversaries are using the coronavirus crisis to deepen their presence in the U.S. market.
Inhofe and his colleagues on Thursday called on Trump to "aggressively" use the Committee on Foreign Investment in the U.S.' review system to bear down on Chinese investment, which they said may target small and midtier companies that have been financially ravaged by the coronavirus pandemic.
"There is clear and compelling evidence that our competitors see this as an opportunity to enhance their strategy position in key industries while other nations are paralyzed by the coronavirus pandemic," the senators said in a Thursday letter.
The letter highlighted the threat of Chinese state or private actors compromising the defense industry by sinking funding into the smaller companies that supply the government's larger contractors.
"We encourage you to continue to aggressively use the CFIUS authorities to scrutinize any transaction or investment by People's Republic of China state-owned or private enterprises that could threaten or undermine the national security of the United States," the letter said.
The CFIUS review board screens proposed mergers or acquisitions for national security risks, and under its authority it can impose conditions for a flagged transaction to move forward or completely block a risky merger. This authority was expanded in 2018 when Trump signed into law the Foreign Investment Risk Review Modernization Act, which increased the types of transactions open to a security probe and potentially allows the board to discriminate against foreign investors based on their country of origin.
Before FIRRMA was enacted, the review board scuttled five transactions over security concerns, four of which involved Chinese companies, according to the Congressional Research Service.
The Thursday letter echoes U.S. Undersecretary of Defense for Acquisition and Sustainment Ellen Lord's previous statements that wielding CFIUS' review authority is "more important than ever."
In a March press briefing, she told reporters that small contractors' concerns over their financial viability amid the coronavirus crisis present a "greater attack surface" for foreign investors.
Also Thursday, Senate Democrats held up Republicans' move to add $250 billion to the $350 billion Coronavirus Aid, Relief, and Economic Security, or CARES, Act that would provide loans to companies with fewer than 500 employees. They cited concerns over the funding's access to businesses without an established banking relationship.
--Additional reporting by Andrew Kragie. Editing by Alanna Weissman.
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