IBM urges lawmakers to 'narrow' bill targeting Chinese investment

By Diane Bartz

WASHINGTON (Reuters) - International Business Machines Corp has urged lawmakers to use a different strategy than toughening foreign investment rules because of U.S. concerns about Chinese military actions and intellectual property theft, according to a letter seen by Reuters on Tuesday.

In the letter dated Nov. 9 and sent to the bills' sponsors and co-sponsors, IBM said it was worried the bills would needlessly expand the role of the Committee on Foreign Investment in the United States so that it is bogged down with routine transactions.

CFIUS, an inter-agency panel, blocks international deals that could harm U.S. national security.

"As drafted, the bill could turn CFIUS into a supra-export control agency, unilaterally limiting the ability of American

firms to do business abroad while empowering foreign competitors to capture global markets," wrote Christopher Padilla, IBM's vice president for government and regulatory affairs.

Instead, IBM urged the lawmakers to update export control rules to address their unease.

Officials are concerned about Chinese intellectual property theft, including U.S. high-tech know-how, and militarizing islands in the South China Sea.

Senator John Cornyn, a member of the Republican leadership, introduced a Senate bill while Republican Representative Robert Pittenger introduced an identical bill in the House.

Under the bills, CFIUS could stop smaller investments than ones it now reviews and add new national security factors for CFIUS to consider, including whether information about Americans, such as Social Security numbers, would be exposed as part of the transaction.

Cornyn, in a speech on Tuesday to the Center for Strategic and International Studies, argued the bills were needed because of China's military provocations.

"Unless these trend lines change, we may one day see some of our own technology used against us should, heaven forbid, we ever have to face China in some sort of military confrontation," he said.

Cornyn said he hoped for a Senate hearing on the bill before the end of the year and committee action soon after.

"Every timeline I might speculate about in the Senate I'll probably be wrong. Things always happen slower than we would like but I have a great sense of urgency about this," he said.

IBM did not respond to a request for comment about the letter.

IBM has had transactions successfully go before CFIUS. In 2014, the panel allowed IBM to sell a low-end server business to China's Lenovo. In 2005, it sold its personal computer business, also to Lenovo.

(This version of the story corrects spelling of name in paragraph 8)

(Reporting by Diane Bartz; Editing by Jeffrey Benkoe)