Time to cure US of its paranoia about FDI by Chinese firms

The US administration says it welcomes foreign investment, but it is politicizing Chinese foreign direct investment yet again. Perhaps the US is paranoid about Chinese FDI. An example of its paranoia about Chinese FDI was the Securities and Exchange Commission’s order on Aug 9 to put an indefinite hold on a $20 million acquisition of the Chicago Stock Exchange by a group of buyers led by Chongqing Casin Enterprise Group.

The decision was made after some US congressmen voiced concern that the deal could pose a threat to national security despite the fact that the Committee on Foreign Investment in the United States cleared the transaction in December.

No wonder a recent report in The Wall Street Journal stated: “The Chicago Stock Exchange is a relic of history, trading less than 0.5 percent of US stocks and in such straits that it has been looking for a buyer. That isn’t how US officials see it.”

Robert Reed, a columnist with the Chicago Tribune, was more explicit in his column last month, “Time to OK Chinese investors’ controversial Chicago Stock Exchange deal.” In the column, Reed hoped the SEC would not cave to the oversized political anxieties due to doubts that the Chinese government is behind the buyout and could use the exchange to launch cyberattacks or game the US financial market. He said that if given the go-ahead, the deal promises to be a plus for the local economy and a needed lift for the Chicago Stock Exchange. Members of the Chicago City Council also supported the deal.

Reed said it would be a big mistake to slam the door on the deal “because of unspecified and broad-based suspicions about Chinese government influence or venality”.

The paranoia exhibited over the Chicago bourse deal is one of the many in the US in recent years. Two months ago, Reuters cited an unreleased Pentagon report warning that China is skirting US oversight and gaining access to sensitive technologies through transactions that currently do not trigger CFIUS review. And US lawmakers are drafting legislation to give CFIUS more power to block foreign technology investments.

In February last year, US Senator Charles Grassley of Iowa said the acquisition of Swiss agribusiness company Syngenta by ChemChina would threaten US food security. The then Barack Obama administration complied. Later, no plausible threat could be found and the deal went through.

In 2012, Obama personally intervened to block the acquisition of wind farms in Oregon by Chinese-owned Ralls Corp, citing its proximity to a military facility. In the same year, a House Intelligence Committee report described Chinese telecom equipment giants Huawei and ZTE as posing a national security threat. For many in the US, the sheer fact that Huawei founder Ren Zhengfei once served in the People’s Liberation Army is enough evidence for such an accusation.

The US administration says it welcomes foreign investment, but it is politicizing Chinese foreign direct investment yet again.

If such US paranoia is justified, the Chinese government should look into major US companies to see if any of their founders and top executives served in the US military or intelligence agencies. The close ties of companies such as General Electric, Honeywell and Boeing to the US military should be enough reason to blacklist them for investment in China.

In 2010, MasterCard, VISA, PayPal, Bank of America and Western Union, under US government order, blocked WikiLeaks’ banking services after it published US government documents. Julian Assange, WikiLeaks founder, called these institutions “instruments of US foreign policy”.

If that is the case, the Chinese government should more closely scrutinize these companies which are seeking a growing presence in China, in order to make sure they will not disrupt the Chinese market under any circumstances. And this is a serious national security issue.