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Illustration: Lazaro Gamio/Axios

Both the Senate Banking Committee and the House Financial Services Committee yesterday approved bills to strengthen the Committee on Foreign Investment in the United States (CFIUS).

The big picture is that Congress wants to make it harder for Chinese companies and its government to access critical technology and infrastructure. It will certainly slow down cross-border M&A (if not reduce it), and make some U.S. investment firms less likely to accept co-investment from China.

The details: There are some differences between the two, but the Senate one is more comprehensive and is expected to mostly carry the day.

  • The Senate legislation isn't explicitly about China, but make no mistake: It is all about China.
  • The bill has bipartisan support, and the only possible monkey wrench could be if China raises loud objections during the ongoing trade negotiations.

Digging down, there are two big groups of exemptions: The first relates to exempted countries — which is expanded from earlier drafts and is designed to prevent CFIUS from getting drowned in a flood of applications:

  • NATO countries are exempted
  • Major non-NATO allies, including Israel and Japan, are exempted
  • Countries with special security relationships to the U.S., such as Singapore, could be exempted by future rule-making.

The other exemption is for "passive investments," which includes three main requirements:

  • Investor cannot have board or board observer rights.
  • Investor cannot have access to non-public technical information (this is tightened from an earlier version that included such things as access to product road-map).
  • Investor cannot have any say in company operations outside of normal shareholder votes.

There also is a specific clarification that effectively permits limited partnership in investment funds, save for some unusual circumstances.

One sticky issue remains the specific definition of "critical technology and infrastructure," and the centrality of that technology to a company's business. For example, what if an e-commerce company uses proprietary AI technology to analyze customer sentiment, or robotics in its fulfillment process? Does it count?

This leads to the bottom line: Rule-making from Treasury will become as important as the final legislative language.

Go deeper

DHS temporarily suspends use of horse patrol in Del Rio

U.S. Border Patrol agents watch as Haitian immigrant families cross the Rio Grande from Mexico into Del Rio, Texas on Sept. 23, 2021. Photo: John Moore/Getty Images

The Department of Homeland Security on Thursday temporarily suspended the use of horse patrol in Del Rio, Texas a DHS spokesperson confirmed.

Why it matters: The suspension comes after images showing border patrol agents whipping at and charging their horses at migrants surfaced earlier in the week, prompting widespread criticism of the Biden administration's handling of the crisis at the border.

Southwest drought is worst on record, NOAA finds

In a stark new report, a team of NOAA and independent researchers found the 2020-2021 drought across the Southwest is the worst in the instrumental record, which dates to 1895.

Why it matters: They also concluded that global warming is making it far more severe, primarily by increasing average temperatures, which boosts evaporation.

2 hours ago - World

Taliban: Executions and strict punishments will return

Taliban fighters in Kabul. Photo: Oliver Weiken/picture alliance via Getty Images

Strict punishments such as hand amputations and executions will return in Afghanistan, one of the Taliban's founders said in an interview with the Associated Press.

Why it matters: Despite attempting to project a new image, the Taliban remain committed to a hard-line, conservative ideology, including harsh ruling tactics.

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