Branstad says bans on Chinese investments must balance security and economic opportunity

Former U.S. Ambassador to China Terry Branstad said the Iowa Legislature must walk a “fine line” with bills that would restrict investments by Chinese and Iowa governmental entities.

The Iowa House and Senate are moving to ban various forms of investment between the state and the People’s Republic of China. Examples of restrictions include the ownership of real property by Chinese nationals and investment of public and state board of regents funds in companies that are owned or controlled by the Chinese military or government.

Iowa and China have a long, storied connection stretching back to the mid-1980s, when then-governor Branstad and then-provincial official Xi Jinping met during a trip to study American agriculture. It has continued since then.

“One of the things I did as governor is I traveled the world to try to not only market our products, but also to encourage investment,” Branstad said. “I think it’s a fine line the Legislature needs to thread, to try to protect our interests, but not be so restrictive as to prevent economic development opportunities that will create good jobs in Iowa and, of course, China is a little different than some of the other ones… The big challenge is if they’re private as opposed to state-owned enterprises, if they’re state owned enterprises, we have concerns.”

Branstad was appointed by then-President Donald Trump to be ambassador to China and served  from 2017 until October 2020, when he resigned to come back to help Trump’s campaign in Iowa. Currently, he is a partner at Branstad Churchill Group, a consulting firm he started with his former chief of staff in Beijing, Steve Churchill, and president of the World Food Prize.

Branstad noted that Iowa already has some restrictions on foreign investment. He harkened back to when the Japanese seemed to be America’s most significant threat and restrictions on their financial activity were popular.

“On farmland, we have a safeguard. Now on other things, there might be some concern about investments that could jeopardize our national security. In fact, the federal government has just put six more Chinese companies on the list because of investing in surveillance, in military technology. So that’s our biggest concern,” Branstad said.

“We’re concerned about American companies, even, investing in that kind of technology in China, because we think it could be a threat to our national security…” he said. “With regard to Chinese investments, we need to protect our national security and our technology. Other than that, I do think that normal investments ought to be encouraged and supported.”

Branstad brought up Confucius Institutes, learning centers funded by Chinese entities including the government and the security risks they can pose. Many have been shut down or have changed their names since former President Trump’s crackdown.

“There’s a growing awareness that the Chinese have used the connections to universities to do surveillance or to steal technology. We had an issue several years ago, with them attempting to steal some corn technology. Here in Iowa,” Branstad said. “And that was prosecuted, people involved in that were prosecuted. We just need to be careful. We need to protect Americans’ technological advantage and our national security.”

None of the bills have received consideration by the full House or Senate.

An Iowa Senate committee on Wednesday narrowed legislation dealing with restrictions on investment in companies with ties to China’s military. The Senate State Government Committee voted to approve Senate File 98, which prohibits investments of certain public funds in companies owned or controlled by Chinese military or government services.

The committee unanimously approved an amendment that would limit the list of prohibited investments to companies restricted by the federal government. The bill moves next to the full Senate.

House File 181, which deals with Iowa Board of Regents investments, passed the House Education Committee three weeks ago and is awaiting floor debate.

Editor’s note: Luke Clausen is a former intern with Branstad Churchill Group and currently helps to run the Ambassador-in-Residence Initiative at Drake University.