by Bryan Burack
Over the past two years, nearly half the states in America acted to scrutinize purchases of land linked to China and other foreign adversaries. Concerns focus primarily on national security threats from China, and they’re well-founded.
The federal government has no idea how much real estate Chinese entities own in the United States. The U.S. Department of Agriculture legally is required to track foreign ownership of agricultural land, but underestimates Chinese ownership by at least 50 percent.
And even though Chinese investments in the U.S. are decreasing overall, China’s purchases of American real estate have grown. What’s more, federal national security capabilities intended to scrutinize these purchases repeatedly have failed to address even the most glaring threats.
The U.S. government approved the Chinese purchase of Smithfield Foods, the largest U.S. pork producer, which included tens of thousands of acres of farmland.
The government also approved the purchase of tens of thousands of acres in Texas by a former Chinese military officer for a commercially dubious project near a U.S. Air Force base and Texas’ power grid. Texas legislators, led by state Sen. Tan Parker, a Republican, ultimately handled the threat themselves.
In another illustrative failure, the federal government said it didn’t even have the authority to review a Chinese company’s $700 million project near another Air Force base in North Dakota, which the Air Force described as a “significant threat to national security.” Thankfully, local authorities heeded the warning and blocked the project themselves.
Clearly, U.S. national security agencies must 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 American real estate. Laws requiring disclosure of foreign ownership of farmland need to be enforced.
The Committee on Foreign Investment in the United States, charged with scrutinizing foreign investments for national security concerns, needs to have jurisdiction over Chinese land purchases and to police that jurisdiction thoroughly. The interagency committee also needs to treat Chinese ownership of critical capabilities such as food production as the national security threat it is.
Dozens of states already restrict foreign land ownership, and many have taken action against land purchases by foreign adversaries in just the past two years. As state legislators continue to address real estate-related threats, here are three principles to help ensure that new laws effectively address threats without being overly broad or causing undue hardship for businesses and individuals.
1. Consider reviewing transactions rather than simply banning purchases. As a general principle, property restrictions should be as narrow as possible to address genuine threats.
Reviewing individual transactions can lessen the need for blanket bans, allow states to preserve opportunities for economic development that don’t present national security threats, and prevent the need to legislate loopholes when a state has an existing reliance on a corporation owned by a foreign adversary.
2. Address all potential threats. Some states have limited new restrictions to adversary governments or state-owned firms, but there is no such thing as a truly private Chinese company.
All Chinese companies legally are required to obey the dictates of China’s communist government, and real estate restrictions should address ostensibly private Chinese companies as well as their subsidiaries.
Similarly, some state bills apply only to agricultural land. Although this is a sensible category to address first, China-related national security threats are present in purchases of non-agricultural land and those also should be addressed.
3. Protect the free market. Consequences should target foreign adversaries alone, and criminal or civil liability associated with land ownership restrictions shouldn’t be imposed on sellers, real estate professionals, or lenders.
States also should be mindful not to damage the integrity of land records and chain of title. They should ensure that forced divestments should be undertaken only through regular judicial processes and properly recorded.
Although the threat from China is global in nature, Chinese threats to the U.S. homeland are becoming especially acute because of repeated cyberattacks, intellectual property theft, dangerous plans for American businesses, surveillance, infrastructure penetration, military signal tapping, and spying on military bases—to say nothing of last year’s notorious spy balloon incident.
Chinese ownership of critical real estate would exacerbate all of these threats and heighten long-term risks such as adversary control of the U.S. food supply.
States are right to be concerned, and the federal government is failing to support them. Both state and federal governments can and should take action to address Chinese purchases of U.S. real estate before this problem becomes a crisis.
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Bryan Burack is a senior policy adviser for China and the Indo-Pacific at The Heritage Foundation.
Photo “Smithfield Foods Factory Farm” by Smithfield Foods.
