U.S.-China deals are still getting done, despite the recently expanded jurisdiction of the Committee on Foreign Investment in the U.S. It takes some thinking out of the box, but business must go on, according to a report in The Deal

Corporate partner Tom Shoesmith, Pillsbury’s China practice leader, said there are ample buy-side opportunities for Chinese investors despite escalating trade tensions and protectionist rhetoric in Washington.

"The U.S. economy is the largest [market] in the world, China is number two and California is number five," he said. "No country in the history of the developed world has ever succeeded by trying to hold back the tide."

Shoesmith urges clients skittish about the committee to consider non-equity investments beyond its jurisdiction. "If you can achieve your commercial objectives without even engaging with CFIUS, well, so much the better," he said.

Alternatives include debt financing, technology licenses, joint ventures and greenfield projects, avenues he explored in a recent essay. Foreign investors can legally fly under the committee's radar with 10% minority stakes in U.S. assets if sensitive industries are not involved, or through U.S.-run investment funds. Parties also can agree to convert debt to equity contingent on CFIUS clearance.

Nevertheless, there are caveats. Under a new law that expanded the committee's reach, passive investments require mandatory CFIUS filings if they involve one of 27 critical technologies. Soon, "emerging and foundational" technologies will be added to the list.

Shoesmith divides transactions into traffic signal-type categories. An obvious national security risk is a red light that should be abandoned. Under a yellow, the parties should work with CFIUS to assuage its concerns through mitigation. Transactions with no security issues can move forward under a green.

“In China, they say it doesn’t matter if the cat is black or white, as long as it catches mice,” Shoesmith said. “Business must go on, and in most cases there is a way to work within the CFIUS rules and still move the companies’ business objectives forward.”