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As Stocks Sink, Pentagon Fears Foreigners Will Buy Control of US Defense Firms

The coronavirus pandemic has made vetting foreign investment more important than ever, officials say.

Top Pentagon leaders fear the decline in stock prices prompted by the coronavirus outbreak could lead to an increase in foreign investment in — and control of — U.S. defense companies. 

“The foreign investment issue is something that I've been tracking for the last couple of years,” Ellen Lord, defense undersecretary for acquisition and sustainment, said during a Wednesday briefing at the Pentagon. “There's no question that we have adversarial capital coming into our markets through the various needs.”

While concerns about foreign investment in U.S. companies are hardly new, Pentagon officials have become increasingly worried as the pandemic sends markets plummeting.

“We have tools to combat adversarial capital, like strengthening and expanding national security investment reviews under the Committee on Foreign Investments in the United States ... are more important than ever,” Jennifer Santos, deputy assistant defense secretary for industrial policy, said during Wednesday’’s briefing. “We simply cannot afford to let this period of uncertainty eat into reviews that for investments is shifting into hyper vigilance.”

Last year, the Pentagon launched an effort to combat Chinese investment in some niche technology sectors, including small drones. Under the so-called Trusted Capital Marketplace, defense officials  would create a list of investors not backed by foreign financiers.