How $2.1tn Chinese offshore investments pushed the US to tighten investment laws in 2018

 

 

 

China’s state-backed investment drive, often masked through shell companies, offshore loans and “private” buyers, had pushed the US to overhaul its investment laws in 2018. The shift stemmed from a little-noticed 2015 deal: the purchase of Wright USA, an insurer covering FBI and CIA personnel, by China’s Fosun Group.

According to a BBC report, the alarm was raised in 2016 when US intelligence reporter Jeff Stein received a tip about the sale. “Someone with direct knowledge called me up and said, ‘Do you know that the insurance company that insures intelligence personnel is owned by the Chinese?’ I was astonished!” he said.

Wright USA held personal data of US intelligence officials. Stein told the BBC, “There was nothing illegal about it… But because everything's intertwined so closely in Beijing, you're essentially giving that [information] up to Chinese intelligence.”

Fresh data later showed that four Chinese state banks had routed a $1.2 billion loan through the Cayman Islands to finance the acquisition. Stein’s Newsweek story triggered a CFIUS inquiry, after which Wright USA was sold back to American owners.

What led to the 2018 law reforms?

US intelligence officials confirmed that this case helped shape the Trump administration’s 2018 tightening of investment laws, as Washington recognised the scale of China’s global purchases.

AidData, which tracks Beijing’s overseas spending, found that since 2000, China had spent $2.1 trillion abroad. “It came as a great surprise… there were hundreds of billions of dollars going into places like the US, the UK and Germany,” said Brad Parks, AidData’s executive director.

Many of these deals aligned with China’s Made in China 2025 plan to dominate technologies such as robotics, EVs, AI and semiconductors. Victor Shih of UC San Diego said, “The government controls interest rates and directs where the credit goes… possible only with very strict capital control.”

Across Europe, Chinese-backed loans helped acquire sensitive assets. Rotterdam’s port had majority Chinese ownership stakes, while the Dutch government intervened in semiconductor firm Nexperia over fears of tech transfer to China.

Even so, by 2018 the US had tightened screening across sectors like chips and telecoms, with the UK, EU and Australia later following.