The Biden administration is seeking to broaden its powers significantly to block foreign investments by making it harder to buy land near military bases, a move that could make it harder for Chinese companies to build factories in the United States.
The Treasury Department proposed a new rule on Monday that would add more than 50 military installations across 30 states to a list of locations it has deemed sensitive to national security. If enacted, the rule would bolster a 2018 law that gave the Committee on Foreign Investment in the United States the ability to block foreign land purchases if they are within a certain proximity of a base.
The proposal comes as Democrats and Republicans in Congress have become increasingly concerned that Chinese investments in the United States threaten national security and as the Biden administration has rolled out new tariffs to curb imports of Chinese electric vehicles and solar panels.
The Treasury Department said the move was the result of a long-term review of the committee’s jurisdiction and that it was not directed at investments from any specific country.
“CFIUS plays an integral role in U.S. national security by thoroughly reviewing real estate transactions near sensitive military installations, and this proposed rule will significantly expand its jurisdiction and ability to accomplish this vital mission,” Treasury Secretary Janet L. Yellen said in a statement, using shorthand for the committee.
The rule would give the committee the power to review real estate deals within one mile of 40 additional military installations and within 100 miles of 19 new military installations. The additions to the list were the result of a review by federal agencies, including the Defense Department, to determine what facilities are most sensitive.
“This is really significant insofar as it shows that the Department of Defense is taking a more aggressive posture and is becoming more risk averse about property around military installations,” said J. Philip Ludvigson, a partner at the law firm King & Spalding who specializes in national security risks related to foreign direct investment.
The rule could further complicate efforts by Chinese entities to invest in the United States. Such investments have been declining in recent years amid growing anti-China sentiment and tougher scrutiny of deals by regulators.
In May, President Biden issued an order that forced a Chinese-backed cryptocurrency firm to divest from a property that it owned near a Wyoming nuclear missile base.
A Treasury Department official declined to say whether the new rules could affect a $2.4 billion manufacturing facility that Gotion, a Chinese electric vehicle battery producer, is building in Green Charter Township, Mich. The project has drawn strong opposition from local residents who have argued that the plant would be too close to Camp Grayling, a National Guard training facility that is less than 100 miles away.
The department included Camp Grayling in its list of additional proposed sites. The rule would not apply retroactively to transactions that have already closed, but if a company tried to purchase additional property related to a project, those acquisitions could be reviewed.
Chuck Thelen, the vice president of Gotion’s North American manufacturing operations, said in a statement that the company was moving ahead with construction of its factory and that it did not believe the new rule would apply to land it had already purchased.
“Gotion continues to welcome and encourage any additional CFIUS reviews if it does decide to purchase additional property in the future,” Mr. Thelen said.
The Biden administration is also reviewing Nippon Steel’s acquisition of U.S. Steel, which Mr. Biden has made clear that he does not want to happen. The proposed real estate rules are unlikely to affect that review, which would be based on national security concerns that go beyond the location of the real estate that the Japanese company would be acquiring.
John Kabealo, a Washington-based lawyer who specializes in cross-border transactions, said the Treasury Department is likely expanding the list of military installations because CFIUS has not been able to scrutinize certain real estate transactions that have raised questions. Currently there are 227 military bases on the committee’s real estate review list.
“The effect of the real estate transactions as they were articulated in their original form has been relatively minimal,” Mr. Kabealo said.
Dozens of states have been working on their own initiatives to curb foreign investments out of concern that the federal government has been too lenient.
A new law in Florida is the most far-reaching, effectively prohibiting most Chinese individuals without a green card from purchasing residential property.
