Obama moves to block Chinese tech deal
HONG KONG — President Barack Obama on Friday moved to block a Chinese deal to buy a hightech company on national security grounds, an unusual step that could set the stage for greater tensions between his successor, Donald Trump, and a Chinese government determined to bolster its technological capabilities.
The intervention in a Chinese company’s bid to buy a German semiconductor company, Aixtron, comes after Chinese companies have spent billions to acquire technology in Europe and the United States. U.S. officials have increasingly moved to stop such deals, but Chinese companies have shown growing adeptness in getting around those restrictions to strike up relationships that could someday lead to greater access to technology.
A Treasury Department statement said the administration blocked the purchase of the U.S. portion of Aixtron’s business because it posed a national security risk relating to “the military applications of the overall technical body of knowledge and experience of Aixtron.”
It wasn’t clear whether other parts of the deal could be salvaged. Officials at the German chip company and its would-be Chinese buyer, the Fujian Grand Chip Investment Fund, did not immediately comment.
By rejecting the deal, the Obama administration showed how far it would go to keep China from using its wallet to acquire sensitive technology from the West. It blocked previous Chinese technology purchases only indirectly, using an advisory panel of government and intelligence officials who can discourage — but not directly kill — foreign deals. That same panel earlier expressed skepticism over the Aixtron deal.
That indirect strategy kept Obama from looking like a free-trade opponent, especially when the company in question was not American, and softened any potential response from Beijing. But Aixtron and its Chinese suitor tested that strategy by plowing ahead despite the panel’s concerns, forcing Obama to act.
Obama’s cancellation sets a stronger tone as Trump prepares to take the White House. As president, Trump will have considerable power to appoint the members of that advisory panel, called the Committee on Foreign Investment in the United States. He is likely to hear from members of Congress who have been pushing to toughen up and to broaden the panel’s reviews to encompass more types of deals.
Trump has been critical of China’s trade practices.
“It could feed into the narrative about how the Trump administration is going to get better deals for things, and this is the kind of deal he wouldn’t allow because it would affect U.S. jobs and U.S. manufacturing capabilities in one of the areas where we’re still the most competitive,” said Adam Segal, a technology security expert at the Council on Foreign Relations.
Still, simply rejecting deals is not so simple, Segal and others say. Wall Street sometimes pushes for such deals to go through, arguing that U.S. companies can use Chinese money to invest or save jobs. Steven Mnuchin, a Wall Street veteran, is Trump’s pick to be Treasury secretary, heading a department with considerable say over the advisory panel.