NYT: Chinese Purchases of U.S. Companies Have Some in Congress Raising Eyebrows

  September 30, 2016   News Stories

News story originally published at NYTimes.com

By Edward Wong

Movie theaters and studios are rarely the focus of geopolitical conflict.

But 16 members of Congress are raising this question: Should foreign acquisition of these kinds of American companies be subject to special scrutiny?

In a recent letter, those politicians cited the case of the Dalian Wanda Group, the Chinese conglomerate that in January bought Legendary Entertainment, one of Hollywood’s biggest production companies, for as much as $3.5 billion. In 2012, Wanda bought AMC Theaters, the large American chain, for $2.6 billion.

“Should the definition of national security be broadened to address concerns about propaganda and control of the media and ‘soft power’ institutions?” the representatives said in the letter, which was dated Sept. 15 and addressed to Gene L. Dodaro, comptroller general.

Mr. Dodaro is the head of the Government Accountability Office, and the aim of the letter was to urge that office to consider whether the government process to review foreign investment in the United States needs to be expanded. The process is overseen by the Committee on Foreign Investment in the United States, or CFIUS, an interagency group that is supervised by the Treasury Department.

“As we prepare for the upcoming presidential transition, now is an opportune time for G.A.O. to review what has worked well, and where Cfius authorities may need to be expanded, especially given the rise in state-controlled enterprises from China and Russia, among other designated countries,” the letter said.

Wanda is not a state-controlled enterprise, but the writers said that any Chinese company designated a “state champion” that benefits from “illegal subsidies” could pose a strategic, if not overt, national security threat. They said there have been “growing concerns about China’s efforts to censor topics and exert propaganda controls on American media.”

The letter also pointed to the $43 billion purchase of Syngenta, a Swiss company specializing in seeds and farm chemicals, by the state-owned China National Chemical Corporation as another transaction that had raised “concern” in Congress. That deal was approved by the committee in August.

In a list of nine questions at the end of the letter, the signers also asked whether the committee sufficiently reviews Chinese angel or venture capital funds being established in the United States, as well as Chinese investment in technology accelerators and regulators.

In February, Steven Davidoff Solomon, a law professor at the University of California, Berkeley, wrote in The New York Times that some bids for foreign businesses by Chinese companies were canceled after scrutiny by the committee. While it approves most transactions, he wrote, we should “expect tensions to get worse” since Chinese companies are increasingly investing in foreign companies as a way of moving money out of China.

“We are entering into a new phase with Chinese acquisitions,” Mr. Solomon wrote. “The United States’ national security service, never considered a transparent process, is going to have to grapple with how far it can allow these Chinese companies to go.”

Among the signers of the Sept. 15 letter are some well-known critics of the Chinese Communist Party.

Representative Dana Rohrabacher, Republican of California, introduced a bill in 2012 that called for the government to withhold visas for Chinese journalists if Beijing continued its policy of not issuing such documents to American journalists or news organizations that it deemed to be troublemakers. Representative Christopher H. Smith, Republican of New Jersey, speaks out regularly against human rights abuses in China.

“Beijing is increasingly confident that its version of state authoritarianism can be exported, though the Communist Party’s efforts at ‘soft power’ outreach have little credibility or impact at this point,” Mr. Smith said in a written statement to The Times on Wednesday.

“But the buying spree by Dalian Wanda Group and other Chinese investments in Hollywood, media and entertainment should raise questions that restrictions on creative freedom or media self-censorship will follow, particularly when Dalian Wanda’s C.E.O. is very clear that his goal is to subvert American pop culture’s influence and change the world where rules are set by foreigners,” he said.

“Would any movies favorably portraying the Dalai Lama, Liu Xiaobo or Chen Guangcheng be greenlighted if they risked the loss of Chinese investment—I don’t think so,” he added, referring to three people deemed prominent political adversaries by the Communist Party.

Wanda declined to comment on Friday.

On Wednesday, Wang Jianlin, Wanda’s chairman and founder, told CNN that he thought the American lawmakers were “over-worried.” He also said he would continue to invest in companies in the United States and was interested in buying at least a 50 percent stake in one of the “Big Six” Hollywood studios.

In a speech at Harvard Business School in October 2015, Mr. Wang, designated by Forbes as China’s richest man, emphasized that he ran a “privately owned corporation” whose “first objective is to make money.”

An investigative article published by The Times in April 2015 showed that relatives of top Communist Party officials and their business associates were early investors in Wanda and held significant stakes in the company.

At the Harvard speech, Mr. Wang, in reply to a question about that article, acknowledged that Qi Qiaoqiao, the sister of Xi Jinping, China’s president and the leader of the Communist Party, and Deng Jiagui, her husband, had held shares in Dalian Wanda Commercial Properties but sold them before an initial public offering. Mr. Wang said that meant the couple had missed out on making a “fortune” from capital gains.

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