American investment in China is in the news again, which is odd since we never do anything about it. One obvious group in the discussion is the US financial community, putting profits ahead of the harm already done and still being done to our economy by Chinese entities, the Communist Party’s harsh repression, and the possibility of war over Taiwan. But people of principle are also well off track here.

I’ll single out Senator Pat Toomey and, to a lesser extent, Congressman Patrick McHenry exactly because I like and respect them and their positions on a number of issues. They have expressed concerns about the US going too far and interfering with legitimate outbound investment. This is like being at the starting line of a marathon and refusing to run because you might get knocked down at mile 15.

The Biden administration has been talking about outbound investment since July 2021 and taken absolutely no action. The Department of the Treasury floated an investment proposal in the spring that would do essentially nothing. The administration has been unable to decide on China issues from modifying tariffs to actually denying licenses to export technology. Not a group primed to overreach.

Those export controls are nominally aimed at limiting China’s acquisition of American technology. Further, the Committee on Foreign Investment in the United States limits the PRC’s acquisition of American technology through investment. It was strengthened in 2018 by overwhelming congressional vote. Despite these policy tools, China has done great harm by stealing and coercing the transfer of technology.

Still, there’s something even worse than letting China use our technology against us—helping them develop their own and become independent. No surprise this is Xi Jinping’s stated goal. It makes no sense to let American funds assist the PRC in reaching its predatory economic goals, and it may be life-threatening to American servicemen and women and Chinese dissidents. Yet this is what’s been happening for years.

It’s a lot of money heading west across the Pacific. From 2017 through 2020, US portfolio investment in China rose $780 billion, more than tripling over that period. We don’t have 2021 figures or how much has bolstered Chinese dual-use, surveillance, or other risky technology because Treasury won’t even publish the necessary information, much less discourage it. Does this sound like we’re on the verge of going too far? 

Xi is a cult-of-personality dictator who next week will announce he’s in charge until death. He has set up concentration camps, established a surveillance state, shattered the PRC’s commitments to Hong Kong, incited conflict on the Indian border, violated maritime conventions in the South China Sea, and repeatedly threatened Taiwan. His economic policies feature destroying foreign competition and making others dependent on China.

According to those fearful of US government action, none of this is particularly important. What’s more important is to make sure American firms can continue to fund China’s development of advanced technology and freely invest in Chinese firms that are promising because they illegally use foreign intellectual property at no cost or are heavily subsidized by Beijing to support internal repression and the People’s Liberation Army.

We should aim investment restrictions at China plus a very few countries we already don’t invest in, such as Iran. Only those. We should target only the highest-risk sectors. Unfortunately, we can’t. While claiming competition with China is the top challenge of our generation, we sent them almost $200 billion a year and didn’t track where it went. Because this is what the financial community wants, and what Senator Toomey and others are defending.

It’s popular for American politicians to talk tough on China. When it’s time to act, though, all they offer is empty posturing and strawmen. The dangerously misguided thing we’re doing is not overreaching on investment restrictions. We haven’t taken the first step. The dangerously misguided thing we’re doing is pouring money into China, blindly. Defenders of this are way out on a limb, and Xi Jinping has a saw.

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