by Bryan Burack
Over the past two years, almost half of America’s states have taken action to control land purchases associated with China and other foreign opponents. Concerns focus primarily on national security threats from China, and they are justified.
The federal government has no idea how much real estate Chinese entities own in the United States. The United States Department of Agriculture is legally required to track foreign ownership of farmland, but underestimates Chinese ownership by at least 50 percent
And while Chinese investment in the U.S. is dwindling overall, Chinese investment shopping American property has grown. Moreover, federal national security forces designed to control these purchases have repeatedly failed to address even the most egregious threats.
The US government approved Chinese purchase Smithfield Foods, the largest U.S. pork producer, which covered tens of thousands of acres of farmland.
The government too approved the purchase tens of thousands of acres in Texas by a former Chinese military officer for a commercially questionable project near a U.S. Air Force base and the Texas power grid. Texas lawmakers, ultimately led by state Sen. Tan Parker, a Republican they dealt with the threat themselves.
In another illustrative failure, the federal government said it didn’t even have the authority to review a $700 million project by a Chinese company near another Air Force base in North Dakota that described by the Air Force as a “serious threat to national security.” Fortunately, local authorities heeded the warning and blocked the project yourself.
Of course the USA National security agencies need to do better.
At the federal level, lawmakers should ensure that national security agencies are able to identify front companies owned or controlled by foreign adversaries that purchase U.S. real estate. Laws requiring disclosure of foreign ownership of agricultural land should be enforced.
The Commission on Foreign Investment in the United States, charged with controlling foreign investment for national security reasons, must have jurisdiction over land purchases in China and carefully monitor that jurisdiction. The interagency committee must also treat Chinese ownership of key capabilities, such as food production, as a threat to national security.
Dozens of states already restrict foreign land ownership, and many have taken action against land purchases by foreign adversaries in just the last two years. As state lawmakers continue to address real estate threats, here are three principles that will lend a hand ensure that modern laws effectively address the threats without being overbroad or creating undue hardship for businesses and individuals.
1. Consider screening transactions rather than simply banning purchases. As a general rule, property restrictions should be as narrow as possible to address real risks.
Reviewing individual transactions can reduce the need for blanket prohibitions, allow states to preserve economic development opportunities that do not pose national security risks, and prevent the need to create loopholes when a state is already dependent on a corporation owned by a foreign adversary.
2. Address all potential threats. Some states have confined the modern restrictions to hostile governments or state-owned companies, but there is no such thing as a truly private Chinese company.
All Chinese companies are legally obliged to obey the orders of the Chinese communist government, and real estate restrictions should apply to supposedly private Chinese companies as well as their subsidiaries.
Similarly, some state statutes apply only to agricultural land. While this is a reasonable category to address first, China-related national security threats are present in non-agricultural land purchases and need to be addressed as well.
3. Protect the free market. Consequences should only apply to foreign adversaries, and criminal or civil liability related to land ownership restrictions should not be imposed on sellers, real estate professionals or lenders.
States should also be careful not to damage the integrity of land registries and the chain of ownership. They should ensure that forced divestitures are undertaken only through regular legal processes and properly recorded.
While the threat from China is global, China’s threats to the United States homeland become particularly acute because repeated computer attacksintellectual property theftperilous plans of the American businesssupervision, infrastructure penetrationmilitary signal tapping and spying military bases– not to mention the notorious spy balloon incident that took place last year.
Chinese ownership of key real estate would exacerbate all of these threats and enhance longer-term risks, such as hostile control over U.S. food supplies.
States are right to be concerned and the federal government is not supporting them. Both state and federal governments can and should take action to address China’s purchases of U.S. real estate before the problem becomes a crisis.
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Bryan Burack is senior policy advisor for China and the Indo-Pacific at The Heritage Foundation.
“Smithfield Foods Factory” photo by Smithfield Food.
