NYT: As China Strikes Deals, U.S. Considers Expanding Foreign Reviews

  October 5, 2016   News Stories

News story originally published at NYTimes.com

By Edward Wong

An American government auditing agency will look at whether the United States should broaden its reviews of foreign investments and purchases in important areas of the economy.

The decision comes as American lawmakers increasingly question purchases by Chinese and Russian companies controlled by or tied to their governments. An expansion of the reviews could affect attempts by Chinese and other foreign companies to make a wide range of purchases and investments in the United States, including Hollywood studios and film production companies, venture capital funds and makers of renewable energy equipment.

In a letter dated Sept. 30, the United States Government Accountability Office, or G.A.O., said that it would begin a reappraisal of the authority of the Committee on Foreign Investment in the United States, an interagency group that is guided by the Treasury Department. The letter was addressed to Robert Pittenger, a Republican congressman from North Carolina.

The letter acknowledged that Mr. Pittenger and other lawmakers had asked the office to examine whether the efforts by the committee, known as CFIUS, “have kept pace with the growing scope of foreign acquisitions in important economic sectors in the United States.”

The study by the G.A.O. will not necessarily change government policy. But its findings could add to the debate over whether the United States could take a tougher stance on foreign investments in American companies.

The letter was a response to a request last month by 16 United States lawmakers who said that foreign companies were making corporate purchases in the United States that could threaten American strategic interests, if one were to move beyond the traditional definition of those interests. For example, the lawmakers cited the recent multibillion-dollar purchases of Legendary Entertainment, the Hollywood production company, and AMC Theaters, the large theater chain, by the Dalian Wanda Group, a large Chinese property developer founded by Wang Jianlin, one of China’s richest men.

The lawmakers argued that such purchases, especially ones involving Chinese and Russian state-owned or state-controlled enterprises, should be given extra scrutiny by CFIUS. The lawmakers said they had “growing concerns about China’s efforts to censor topics and exert propaganda controls on American media.”

In a response on Tuesday to the G.A.O.’s letter, Representative Christopher H. Smith, Republican of New Jersey and a frequent critic of the Chinese Communist Party, said in a statement to The Times that the agency’s review could help Congress and the next president decide whether the definition of national security should be broadened “to address foreign control of media and other ‘soft power’ institutions.”

“As China’s economy slows and Chinese investment in the U.S. is swelling, it is important for Congress to ask questions about foreign acquisitions—corporations and big businesses look at the bottom line, not the big picture strategic and security issues that may be involved,” he said. “Greater scrutiny is needed on investments in areas like technology, media and entertainment which may bring with it restrictions on creative freedoms or self-censorship and possible expansion of foreign propaganda.”

Last week, Mr. Wang told CNN that he intended to continue his buying spree in the United States and would like to acquire a stake of at least 50 percent in one of the “Big Six” Hollywood studios.

Mr. Wang has emphasized that his business is a private enterprise whose first aim is to make money. But the company has ties to the top levels of the Communist Party. Members of the families of Communist Party leaders, including Xi Jinping, the party chief, had early and significant investments.

Lawmakers also raised the example of Syngenta, a Swiss company specializing in seeds and farm chemicals that was bought for $43 billion by the China National Chemical Corporation. That deal was approved by CFIUS in August, though the lawmakers said the purchase had raised “concern” in Congress.

The lawmakers also asked whether CFIUS should look into Chinese angel and venture capital funds established in the United States and Chinese investment in tech accelerators.

CFIUS approves most proposed deals. When it does not plan to approve a deal, it signals its hesitation, and the foreign company attempting to make the purchase usually drops the bid. This has happened with Chinese companies trying to make investments in the United States.

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