China faces heavy scrutiny by U.S. national security watchdog in 2013

WASHINGTON (Reuters) - Chinese investors faced more scrutiny from a U.S. national security watchdog than those from any other country in 2013, the Obama administration said in a report on Thursday.

The report could add to tensions between Washington and Beijing as they negotiate a bilateral investment treaty.

Chinese companies feel they are singled out by Washington, which maintains the increase in recent years of national security reviews in part reflects rising Chinese direct investment flows into America.

Data from the Committee on Foreign Investment in the United States (CFIUS) showed the secretive body reviewed 21 investments that were proposed by Chinese firms or individuals in 2013.

That represents about a fifth of the 97 transactions that were reviewed because a foreign companies was seeking an ownership interest in an industry that might be sensitive to U.S. national security.

It was the second straight year in which China topped the list of covered transactions. Japan was second with 18 transactions, followed by Canada with 12.

A China-U.S. investment treaty could boost the still relatively paltry levels of direct investment between the two countries, and Washington expects Beijing will raise concerns over scrutiny from CFIUS around their treaty talks.

A senior official at the U.S. Treasury, which is the lead department among the government agencies that are part of CFIUS, said the United States does not discriminate against any country in its CFIUS reviews.

Most reviews arise from voluntary notices filed by companies, though CFIUS has the power to start its own investigations and companies often feel compelled to initiate the process.

(Reporting by Jason Lange and Krista Hughes; Editing by Andrea Ricci)