Top Senate Democrat urges Trump to block China deals over North Korea

WASHINGTON (Reuters) - The top Democrat in the U.S. Senate called on President Donald Trump on Tuesday to block some Chinese investments in the United States to pressure China "to help rein in North Korea’s threatening and destabilizing behavior." In a letter to Trump, Senate Democratic leader Chuck Schumer urged him to use his authority through the Committee on Foreign Investment in the United States, or CFIUS, to pressure Beijing by suspending approval of "all mergers and acquisitions in the U.S. by Chinese entities." Schumer's request comes amid concern about North Korea, which fired a missile Friday that experts said was capable of hitting Los Angeles. Trump has repeatedly urged China to rein in its ally North Korea, and Schumer agreed. "It is my assessment that China will not deter North Korea unless the United States exacts greater economic pressure on China," Schumer wrote to Trump, a Republican. "The U.S. must send a clear message to China’s government." Senator John Cornyn, a Republican on the Senate Intelligence Committee, was unconvinced that CFIUS was the right tool. "That’s not specifically the purpose of CFIUS. CFIUS is a national security vehicle to try to make sure that high-tech investments by foreign countries don’t steal our cutting-edge technology," Cornyn said outside his Senate office. "I’m happy to work with Senator Schumer to figure out what his concerns are," added Cornyn, who has urged changes at CFIUS because of China. His worry, however, was not North Korea but that China would close the technology gap between the U.S. and Chinese militaries. Led by the U.S. Department of Treasury, CFIUS reviews foreign acquisitions of U.S. companies on national security grounds and can take action on its own or refer cases to the president. In an interview with Reuters Friday, the top U.S. counter-intelligence official suggested the Trump administration was already working on a plan to toughen CFIUS. "We’re making significant progress on that, working with both sides of Pennsylvania Avenue," said William Evanina, National Counterintelligence Executive, referring to the White House and Congress. "I think it’s going to look a lot different than it does now." Evanina, whose office oversees U.S. government efforts to counter spying and industrial espionage, declined to be more specific but noted that China’s direct investment in the United States quadrupled from 2015 to 2016, to $48 billion annually. China's UN ambassador, on the other hand, has said that it was up to Washington and Pyongyang to work toward talks on North Korea's weapons programs. "(The United States and North Korea) hold the primary responsibility to keep things moving, to start moving in the right direction, not China," China's U.N. Ambassador Liu Jieyi told reporters on Monday. "No matter how capable China is, China's efforts will not yield practical results." While China worries about North Korea’s nuclear and missile programs, and the U.S. reaction to them, its overriding concern, U.S. officials say, is to avoid a North Korean collapse, which could send millions of refugees fleeing toward China and lead to a reunified Korea allied with Washington. Schumer's plan to prohibit CFIUS from approving Chinese deals would be technically legal but would stretch CFIUS' mandate, CFIUS experts said. "What sounds like effectively a bar on Chinese investment that is being suggested is probably legal but quite different than the case-by-case process that CFIUS has used in the past," said Stephen Heifetz of the law firm Steptoe & Johnson LLP who represents clients before CFIUS. "The U.S. government should consider the potential for a Chinese response." The task force this year faces what could well be a record number of deals, many of them controversial as Chinese firms scout U.S. targets as varied as hotels and film studios to hedge against a weaker yuan . (Additional reporting by Diane Bartz, Susan Cornwell and Warren Strobel; Writing by Susan Heavey; Editing by Bill Trott and James Dalgleish)