Publications + Presentations

In a significant move to reshape the landscape of foreign investment, the United States has introduced the America First Investment Policy. This National Security Presidential Memorandum (NSPM), issued on February 21, 2025, aims to bolster national and economic security by imposing stringent restrictions on investments from certain foreign adversaries while encouraging investments from allied nations.

The NSPM targets investor relations with countries deemed foreign adversaries, including China, Hong Kong, North Korea, Cuba, Iran, Russia, and Venezuela. Although the timeline for these restrictions remains unspecified, the policy outlines several key measures to protect U.S. national economic and security interests, including using the Committee on Foreign Investment in the United States (CFIUS) to review and restrict certain (Chinese) investments in strategic U.S. sectors.

Policy Goals + Specific Changes

The administration hopes to make the following policy changes to preserve an open investment environment and reduce predatory investment practices to grow emerging technologies in the United States:

• Imposing Restrictions on China-Affiliated Persons: The U.S. will use CFIUS to restrict investments from China-affiliated persons in critical sectors such as technology, infrastructure, and healthcare.

• Imposing Restrictions on U.S. Persons: New rules will also prevent U.S. companies and persons from investing in China’s military-industrial sector or supporting industries that advance China's military capabilities. Potential repercussions for violating these restrictions include sanctions under the International Emergency Economic Powers Act.
  
  Restrictions will also affect private equity investments, venture capital, greenfield investments, corporate expansions, and publicly traded securities from sources including pension funds, university endowments, and other limited-partner investors. The NSPM also encourages American universities to stop supporting foreign adversaries with investments and cease granting university access to “supporters of terrorism.”
   
• Reviewing 1984 U.S. – PRC Income Tax Convention: Additionally, the administration will review the 1984 United States – The People's Republic of China Income Tax Convention to determine its relevance in the current geopolitical climate and whether it should be suspended or terminated.
   
• Strengthening CFIUS Authority: In order to meet these goals of stopping PRC-affiliated investment, the U.S. looks likely to expand CFIUS’s authority while ceasing “mitigation” agreements for foreign adversaries. The NSPM aims to strengthen CFIUS authority over greenfield investments, real estate transactions near sensitive military installations, and emerging technologies like artificial intelligence.
   
• Pushing for Expedited Reviews: The U.S. will create a “fast-track” process to facilitate greater investment from specified allies and partners. Investments over $1 billion will also be able to undergo expedited environmental reviews.
   
• Encouraging Passive Investment: The NSPM encourages passive investment from all foreign persons, provided these investments do not confer controlling stakes, managerial influence, or access to non-public technologies or technical information.
   
• Reviewing Financial Auditing Standards: The administration will determine if adequate financial auditing standards are upheld for companies covered by the Holding Foreign Companies Accountable Act.
   
• Reviewing Foreign Variable Interest Entities and Subsidiary Structures: The administration will review the variable interest entities and subsidiary structures used by foreign adversary companies to trade on U.S. exchanges.
   
• Restoring Fiduciary Standards required by the Employee Retirement Income Security Act of 1974: The administration also plans to restore fiduciary standards to ensure that foreign adversary companies are ineligible for pension plan contributions.

Impact on Global Investment

While the NSPM does not impose immediate restrictions, it signals a shift towards greater scrutiny of foreign investments, particularly those involving foreign adversaries, and acknowledges that foreign investment is important for economic growth, job creation, and innovation.

The Memorandum’s language suggests an interest in investors distancing themselves from foreign adversaries, especially from China. The Memorandum also calls for a review and possible broadening of the scope of the Outbound Investment Security Program. Currently, the Program requires or prohibits notification for certain investments in China’s quantum information technologies, artificial intelligence, and semiconductors and microelectronics sectors. However, the Program could be expanded to include private equity, venture capital, greenfield investments, corporate expansions, and investments in publicly traded securities, from sources including pension funds, university endowments, and other limited-partner investors upon review. We are closely monitoring the Outbound Investment Security Program, and the contemplated changes.

To avoid future regulatory liabilities, U.S. businesses and educational institutions may need to distance themselves from foreign adversaries. The NSPM encourages U.S. businesses to ensure their resources are not used to further foreign adversaries' interests. This could include reassessing investment portfolios, divesting from adversarial nations, and scrutinizing partnerships and collaborations.

Force + Effect of Presidential Memoranda

While there are some technical differences, presidential memoranda are functionally interchangeable with executive orders. They carry the force of law for the executive branch and are subject to judicial and congressional review. Courts may find a memorandum unlawful if it exceeds presidential authority or violates constitutional principles. Congress can also pass legislation to oppose the policy or block funding for its implementation.

To know more about the implications of this NSPM, or if you need to consult on this issue, contact Vinita Mehra.