In a first for US investment screening, a public tip has prompted President Joe Biden to force the divestiture of Chinese-owned land on national security grounds. The government is now expected to receive an uptick in referrals about Chinese transactions allegedly requiring investment screening, risking a further rise in Sinophobia in the country. 

On May 13, Mr Biden issued an executive order requiring Chinese-owned MineOne Partners to sell land it acquired in Wyoming in 2022, because its crypto-mining operations used foreign-sourced technology capable of conducting surveillance on a nearby military site. 

The order came one day before the US sharply raised tariffs on Chinese imports, and amid growing tensions between the two countries which has sparked a rise in Sinophobia affecting foreign investment and a crackdown on Chinese ownership of farmland.

“[The order] certainly fuels that fire,” says Christine Daya, a partner at DLA Piper in Washington DC. “The anti-China sentiment over the past five years or so might encourage public tips and a specific focus on China.” 

The president is authorised by the country’s investment screening watchdog, the Committee on Foreign Investment in the United States (Cfius), to block or unwind deals deemed to present national security risks and which cannot be resolved by Cfius. 

Last week’s order was only the eighth time a president has used their Cfius powers to stop a transaction. Seven of these have involved Chinese investments, in line with Cfius’s intense scrutiny of the increasing number of deals emanating from the country over the past decade. 

MineOne is the first time a presidential block is known to have been instigated by a public tip, as Mr Biden states in his executive order. Anne Salladin, a partner at Hogan Lovells who worked for Cfius for almost two decades, “absolutely” expects more tips to follow given the public nature of the presidential order.  

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Cfius has always received tips about suspect transactions through unofficial channels, a process it formalised in 2020 by establishing a public tip portal to enhance its monitoring of investments, like MineOne’s, of which the Committee were not notified. These referrals have predominantly come from advisors and competitors, but its explicit reference in a public presidential order is expected to spark more referrals from the population at large. “It is an advertisement for the tip line, for sure,” says Nova Daly, a public policy advisor at Wiley Rein and an ex-Cfius official. 

The departments of treasury and defence issued statements on Mr Biden’s decision which also encourage people to use the tip line to report investments believed to warrant Cfius’s review. “It points to the fact [Cfius sees tips] as a very useful means of tracking … transactions they think raise national security concerns,” says Hogan Lovells partner Brian Curran, adding that it challenges Cfius’s reputation as a secretive “black box”.

More on US-China tensions:

• Opinion | The costs of anti-China sentiment in the US
• US farms grow fearful of foreign investors
• China's steel overcapacity foments dumping concernss

Land-ownership controversies

The government encouraging tips to Cfius as part of the MineOne decision is particularly problematic for Chinese investment for two reasons. 

First, there is evidence that Sinophobia is spreading throughout the country, with recent surveys by the Pew Research Center showing that eight of 10 US adults have an unfavourable view of China, up from less than five out of 10 in 2017. 

Second, Cfius scrutiny has historically focused on the acquisition of existing US businesses. MineOne’s transaction, however, is the first time Cfius has publicly used its extended powers under a 2020 reform that allows it to review certain land acquisitions. It means that MineOne’s transaction is the closest the watchdog has come to publicly blocking greenfield investment which typically falls outside Cfius’s remit.  “This comes in the context of significant controversies over the purchases of land in various states,” says Ms Salladin, referring to the growing number of states moving to restrict Chinese ownership of real estate. 

Research by the Chicago Council on Global Affairs found that 81 bills banning Chinese ownership of US land were introduced across 33 states in 2023. That same year, the federal government expanded the list of military sites for which land acquisitions in close proximity require Cfius’s approval. This was driven in part by state and local concerns about Chinese land ownership, says Mr Curran, and followed an uptick in Chinese acquisition of real-estate near military facilities. 

Foreign investment practitioners say this crackdown on the ownership of land, which to the public is more visible and tangible than business operations, compounds the risk of Chinese property deals being reported to Cfius. 

“Anti-China sentiment, fed by the government's aggressive policies and rhetoric toward China, has created a climate of suspicion and racism,” concludes Jane Shim, a director at the  Asian American Legal Defense and Education Fund, via email.  

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