(Bloomberg) -- A leading proposal to screen future investment by U.S. companies in China to lower national security risks could significantly slow new transactions and also pressure American businesses to reassess existing operations, according to Rhodium Group.

Up to 43% of all the foreign direct investment transactions into China in the past two decades would likely have fallen under the screening of the proposed National Critical Capabilities Defense Act, according to a Rhodium Group estimate published Wednesday. 

The act, included in the House version of China and semiconductor legislation unveiled Tuesday, would create a committee to be led by the U.S. Trade Representative’s office. That committee would review and contribute to blocking investments by U.S. companies abroad that could result in the off-shoring of “national critical capabilities” to “countries of concern.”

While the Rhodium Group study is a historical snapshot and not an estimate of future impact, “it does underscore how broadly the bill defines ‘critical’ industries and gives an indication of the volume of transactions that would need to be reported for China alone,” authors including partner Thilo Hanemann wrote.

“It underscores the need to narrow down definitions and clarify processes to increase predictability and avoid politicization of individual transactions, especially if -- as under this bill -- members of Congress can initiate investigations,” according to the report.

A similar bill was proposed last year by Senators Bob Casey, a Pennsylvania Democrat, and John Cornyn, a Texas Republican, but it was left out of the China and semiconductors legislation passed in the Senate.

In some ways, the screening would be similar to the Committee on Foreign Investment in the United States that examines inbound investment, though fewer countries would covered. Under the proposed bill, American companies planning to move a critical capability to a U.S. adversary -- a list likely to include both China and Russia -- or a non-market economy would need to notify the committee.

The act would require the critical capabilities committee to review transactions involving the production, services and supply chains in four sectors: medical supplies and personal protective equipment; disaster recovery; military and intelligence, and critical infrastructure. It would also require identifying other critical capabilities in industries including energy, defense and semiconductors, according to the Rhodium report.

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Much like CFIUS, if the committee determined that a transaction posed an unacceptable risk to national security, it could recommend that the president block it.

The research firm produced the report for the National Committee on U.S.-China Relations, a non-profit, nonpartisan educational organization that encourages understanding and cooperation between the two countries.

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