China slams M&A block

Pro­tec­tion­ism stops in­vestor from buy­ing US tech firm

Global Times US Edition - - FRONT PAGE - By Wang Cong

China on Thurs­day crit­i­cized US Pres­i­dent Don­ald Trump’s de­ci­sion to block a planned ac­qui­si­tion of a US semi­con­duc­tor com­pany by a Chi­ne­se­backed in­vest­ment fund, urg­ing the US not to use na­tional se­cu­rity as a pro­tec­tion­ist tool in re­view­ing merg­ers and ac- qui­si­tions in sen­si­tive sec­tors, and to treat Chi­nese firms fairly.

Trump’s rare move to use pres­i­den­tial power to pre­vent the pur­chase of Lat­tice Semi­con­duc­tor by a Chi­nese in­vestor will have a very lim­ited im­pact on China’s de­vel­op­ment of the semi­con­duc­tor in­dus­try but could slow down M&As in the US by Chi­nese firms, which in turn, could hurt US firms and its econ­omy, ex­perts added.

Cit­ing na­tional se­cu­rity con­cerns, Trump on Wed­nes­day blocked Canyon Bridge Cap­i­tal Part­ners LLC’s $1.3 bil­lion bid to ac­quire the US semi­con­duc­tor com­pany. That’s only the fourth time a US pres­i­dent has banned a merger in over a quar­ter of a cen­tury, ac­cord­ing to US media.

The de­ci­sion has drawn con­cerns from Bei­jing, where a Min­istry of Com­merce (MOFCOM) spokesper­son told a press con­fer­ence on Thurs­day that while it is a coun­try’s le­git­i­mate right to con­duct na­tional

se­cu­rity re­views of in­vest­ments in sen­si­tive sec­tors, “it should not be a pro­tec­tion­ist tool.”

MOFCOM spokesper­son Gao Feng fur­ther urged “rel­e­vant coun­tries to treat Chi­nese com­pa­nies’ over­seas M&As ob­jec­tively and fairly, and to cre­ate a rea­son­able and trans­par­ent op­er­at­ing en­vi­ron­ment for them.”

Ex­perts said Trump’s move was in line with the US’ in­creas­ingly tougher stand against China aimed at stop­ping the lat­ter from ac­quir­ing tech­nolo­gies in the semi­con­duc­tor and other ad­vanced tech­nolo­gies, but that its im­pact is very lim­ited.

“If the US thinks it can stop the progress of the Chi­nese semi­con­duc­tor sec­tor by block­ing th­ese deals, they’ve got it wrong,” Xiang Li­gang, chief ex­ec­u­tive of do­mes­tic tele­com in­dus­try por­tal cc­, told the Global Times.

Xiang said that the US and other coun­tries have long tried to block China from ac­quir­ing th­ese tech­nolo­gies, yet China’s do­mes­tic in­dus­try has been ris­ing rapidly. He iden­ti­fied sev­eral of the sec­tor’s ris­ing stars, in­clud­ing Huawei and ZTE.

“We might be lag­ging be­hind the US, but it’s not like we don’t have th­ese tech­nolo­gies. We have hun­dreds of com­pa­nies and bil­lions of dol­lars in State funds to sup­port them,” Xiang said.

In 2016 alone, the num­ber of Chi­nese com­pa­nies in the semi­con­duc­tor and other re­lated ar­eas grew to about 1,200 from 700 the pre­vi­ous year, ac­cord­ing to Liu Kun, vice pres­i­dent of CCID Con­sult­ing’s IC In­dus­try Re­search Cen­ter in Bei­jing.

“The US can block the takeover of its com­pa­nies, but there are so many other ways China can im­prove its tech­nolo­gies,” Liu told the Global Times.

One such way is to at­tract for­eign or Chi­nese tal­ent with a for­eign ed­u­ca­tional back­ground. He said the ma­jor­ity of th­ese com­pa­nies have at least a few peo­ple who have re­turned from work­ing in Sil­i­con Valley or other ar­eas.

Chill­ing ef­fect

Not only will the move not stop China but it could iso­late US com­pa­nies and in­dus­tries from en­gag­ing with the world’s largest mar­ket, said Bai Ming, a re­search fel­low at the Chi­nese Acad­emy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion.

“The US is still the dom­i­nant player in semi­con­duc­tors, but the num­ber of mar­ket play­ers has grown. Frankly, it is the US that needs the Chi­nese mar­ket and cap­i­tal to re­ju­ve­nate its in­dus­try, not the other way around,” Bai told the Global Times.

Trump’s move also af­fects deals in other ar­eas, as it cre­ates a chill­ing ef­fect on fu­ture M&As, Bai said.

“The bot­tom line is that th­ese US com­pa­nies agreed to be taken over by Chi­nese firms, be­cause the bids are at­trac­tive and the long-term prospects are good for them. If you stop those, the US firms are hurt. That’s very un­wise,” he said.

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