Foreign take-over weapon provides Trump with leverage over China
A US GOVERNMENT panel that reviews foreign take- overs of American companies could become a tool for Treasury Secretary nominee Steven Mnuchin to get tough on China.
If confirmed, Mnuchin will become head of the Committee on Foreign Investment in the United States, which reviews the national security implications of overseas investors trying to scoop up US companies or operations. China was the leading source of investments reviewed by CFIUS from 2012 to 2014, accounting for almost a fifth.
Any broadening of the committee’s mandate – a push backed by representatives of both parties in Congress – could raise protective barriers if it opens a path to reject Chinese investments.
Republican Robert Pittenger of North Carolina, an early supporter of President- elect Donald Trump, is leading an effort to determine whether the panel’s legal authority includes foreign governments using sophisticated methods to buy critical infrastructure.
If the boundaries of existing national security laws don’t allow that, he may consider proposing legislation to broaden CFIUS’s mandate, according to his office.
“There may be greater, clearer understanding by the new administration to discern that we need to have better oversight of what the Chinese objectives are,” said Pittenger, who along with 20 law makers, including two Democrats, helped bring forth the first CFIUS review in a decade that will be completed by mid-2017.
“We need to ask if we should give CFIUS extra authority to review the proposed takeover of media, agriculture, financial assets, infrastructure – soft power institutions that were not considered an issue during the Cold War,” he said in an interview by phone.
The US- China economic relationship is at a tense impasse. Trump has accused China of carrying out unfair trade practices that hurt US workers and said he wants to impose tariffs on Chinese goods. He took on the Chinese
There may be greater, clearer understanding by the new administration to discern that we need to have better oversight of what the Chinese objectives are. Robert Pittenger, law maker
government over social media this weekend, rejecting criticism for his decision to flout diplomatic protocol by accepting a phone call from the president of Taiwan, which Beijing considers a rogue province.
In terms of economic ties, more is at stake than ever before – Chinese foreign direct investment in America rose to a record US$ 15.3 billion in 2015, according to Rhodium Group.
“Trump made such an issue of trade with China that it seems plausible that he will” spark a serious shift in the US’s posture toward the world’s second-largest economy, said David Dollar, a former US Treasury attache to Beijing during Obama’s tenure. With China’s “clear history of retaliation,” the two-way relationship “will be bumpy for a while,” he said.
US legislators are taking notice of investments from statecontrolled enterprises from China, including deals such as Dalian Wanda Group Co.’s 2012 acquisition of a controlling stake in AMC Entertainment Holdings.
Twenty-two House law makers, led by Pittenger, have sent a letter to the Treasury Department advising against allowing a firm affiliated with the Chinese government from purchasing Lattice Semiconductor Corp. in Oregon. The US$ 1.3 billion buyout would put components critical to American military applications in the hands of a newly created private equity firm that is backed by Chinese investors, according to the letter. — WP-Bloomberg