Bloomberg scoop confirms my analysis on China seeking U.S. lifting investment restrictions

"Beijing trades TikTok for lifting investment barriers from Washington," I wrote in mid-September after the Madrid talks.

Bloomberg just (October 3 midnight, GMT+8) landed a major scoop China Urges Trump to Lift Security Curbs in Push for Deals, citing inside sources.

China is pushing the Trump administration to roll back national-security restrictions on Chinese deals in the US, dangling the prospect of a massive investment package as part of a proposal that would upend a decade of policy.

The demands from President Xi Jinping’s negotiators also include lowering tariffs on imported inputs from the world’s No. 2 economy used by any Chinese factories built in the US as a result, according to people familiar with the matter, who asked not to be identified discussing private deliberations.

The proposals were raised during trade talks in Madrid last month, the people said. During those meetings, the two sides reached a framework deal to keep Chinese social-media giant TikTok operating in the US, despite national security concerns raised by American lawmakers.

The Chinese floated a figure of $1 trillion earlier this year, according to one of the people, but the size of the potential investment being discussed now is unclear.

This is precisely what I analyzed here in Pekingnology on September 16, entitled Beijing trades TikTok for lifting investment barriers from Washington

To recast

This is purely based on my reading of publicly available information from the just concluded Madrid talks, and it differs significantly from international mainstream media reports you’ve read so far…

Based on the Chinese readout, the consensus is a basic framework encompassing three things, as I highlighted

1. cooperative approaches to appropriately addressing issues related to TikTok

2. reducing investment barriers

3. advancing relevant economic and trade cooperation

Let’s say TikTok deal is a Chinese concession to the U.S. Then for what? At the very least: reducing investment barriers.

from both Beijing’s official readout in text, as well as Li Chenggang’s Q&A, lift relevant restrictive measures against China/reducing investment barriers, is in play here.

The readout frames He Lifeng as “expressed the hope that the U.S. side will,” whereas Li Chenggang said “The U.S. side has also expressed its willingness to.” In my reading, they are talking about the same thing.

……

So, what specific relevant restrictive measures against China/investment barriers are there to potentially lift?

The U.S. has imposed two-way restrictions. When it comes to Chinese investment to the United States, it’s mainly CFIUS, plus Foreign Investment Risk Review Act of 2018 (FIRRMA) which extended CFIUS. When it comes to U.S. investment to China, it’s mainly Reverse CFIUS and NS-CMIC（Non-SDN Chinese Military-Industrial Complex Companies List）.

There is no public info on this, but again my reading is that the U.S. made promises to China on lifting relevant restrictive measures against China/investment barriers in exchange for the TikTok deal.

Otherwise, why would China just concede on TikTok?

……

let me repeat, according to the Chinese readout:

it’s a framework encompassing three things, not a framework on TikTok alone.

……

This WSJ story also says, hedging with the keyword “likely”, that Beijing traded TikTok for a potential state visit from Trump.

I find it difficult to stomach. In addition to my reasoning above based on the Chinese readout and Li’s Q&A, yes Beijing welcomes a Trump visit, but I doubt it is willing to trade TikTok - something very concrete and tangible - for simply a potential visit.

I didn’t need inside sources or boots on the ground in Madrid. I was just sitting in my bedroom, reading between the lines.

Later, I was invited by ChinaFile, an online magazine published by the Asia Society, to share my observation, where I doubled down on the possibility of opening U.S. investment with the “framework ” encompassing but not limited to TikTok

The billion-dollar question is what China has gained in exchange. The Chinese summary described a framework agreement extending beyond TikTok to cover commitments on “reducing investment barriers” and “advancing relevant economic and trade cooperation.” U.S. Treasury Secretary Scott Bessent remarked that the U.S. side had agreed not to take certain actions: “So basically, what they got was the promise of things that won’t happen rather than taking things off.” As the official who would bear the political cost of appearing to concede too much to Beijing, he understandably downplayed concrete concessions…

A wildcard is whether the TikTok framework could open space for renewed two-way investment. Pragmatically, U.S. reindustrialization could stand to benefit. Politically, even if Trump himself were receptive, whether he could overcome overwhelming political resistance is uncertain, despite his current power and discretion. His instinctive affinity for tariffs weighs against trade, yet investment flows could paradoxically reinforce interdependence at the very moment when “decoupling” has become conventional wisdom.

For those who regard renewed interdependence as the least bad outcome for both countries—and for the world—Trump, ironically, may be the most likely American leader to make it possible.

The Bloomberg scoop neatly laid out the “overwhelming political resistance” I mentioned in ChinaFile

Matt Pottinger, a China hawk who served as deputy national security adviser during Trump’s first administration, said allowing a surge of Chinese investment into the US economy would be a major concession to Beijing…

Any agreement to greenlight significant Chinese investment would involve a sharp reversal of policies enacted by both Washington and Beijing over the past decade. A big Chinese investment push into the US could face other barriers, with a growing number of states imposing their own restrictions in recent years, one person familiar with the discussions said…

Washington moved to shut down Chinese deals on national security grounds. The Committee on Foreign Investment in the US has been at the heart of those efforts in sensitive sectors such as chips.

The Committee on Foreign Investment in the US is the CFIUS I mentioned on September 16.

So let me take a victory lap and remind you again, back in May, I was the first to call this, sitting in my student dormitory in Princeton, New Jersey.

Zichen Wang joins ChinaFile Conversation: Chips and Soybeans