Panel urges a ban on state-owned firms buying companies in the US
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US lawmakers should take action to ban China’s state-owned firms from acquiring US companies, a congressional panel charged with monitoring security and trade links between Washington and Beijing said yesterday.
In its annual report to Congress, the US-China Economic and Security Review Commission recommended Congress prohibit US acquisitions by such entities by changing the mandate of CFIUS, the US government body that conducts security reviews of proposed acquisitions by foreign firms.
“The commission recommends Congress amend the statute authorizing the Committee on Foreign Investment in the United States (CFIUS) to bar Chinese state-owned enterprises from acquiring or otherwise gaining effective control of US companies,” the report said.
CFIUS, led by the US Treasury and with representatives from eight other agencies, including the Defense, State, and Homeland Security departments, has a veto over acquisitions from foreign private and state-controlled firms if it finds a deal would threaten national security or critical infrastructure.
If enacted, the panel’s recommendation would essentially create a blanket ban on US purchases by Chinese state-owned enterprises.
The report “has again revealed the commission’s stereotypes and prejudices,” Chinese foreign ministry spokesman Geng Shuang said in Beijing yesterday.
“We ask that Chinese companies investing abroad abide by local laws and regulations, and we hope that relevant countries will create a level playing field,” he told a daily news briefing.
The panel’s report is purely advisory, but could carry extra weight this year because they come as President-elect Donald Trump’s transition team is formulating its trade and foreign policy agenda and vetting candidates for key economic and security positions.
The recommendation to change laws governing CFIUS was one of 20 proposals the panel made to Congress. On the military side, it called for a government investigation into how far outsourcing to China has weakened the US defense industry.
The 16-year-old panel also said Congress should pass legislation that would require its pre-approval of any move by the US Commerce Department to declare China a “market economy” and limit anti-dumping tariffs against the country.
The United States and US businesses attracted a record US$64.5 billion worth of deals involving buyers from China’s mainland this year, more than any other country targeted by Chinese buyers, according to Thomson Reuters figures.
The push into the United States is part of a global overseas buying spree by Chinese companies that this year has seen a record US$200 billion worth of deals, nearly double last year’s tally.
CFIUS has shown a higher degree of activism against Chinese buyers this year, catching some by surprise. Prominent deals that fell victim to CFIUS include Tsinghua Holdings’ US$3.8 billion investment in Western Digital.
Overall, there is no sign that CFIUS has been a significant obstacle to Chinese investment in the United States. In 2014, the latest year for which figures are available, China topped the list of foreign countries in a CFIUS review with 24 deals reviewed out of more than 100 it scrutinized.
Although the number of Chinese transactions reviewed rose in absolute terms, it fell as a share of overall Chinese acquisitions, and the report noted that the vast majority of deals which had been reviewed by CFIUS were cleared.
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