As Donald Trump prepares to take charge in the White House, a US government panel has recommended a series of steps to the Congress stop cash-rich Chinese state-run firms from gobbling up American companies and posing a threat to America's national security.
The US-China Economic and Security Review Commission wants the United States to block Chinese state-owned companies from carrying out takeovers in the country.
Chinese companies are buying up foreign businesses at a record rate this year, fueling unease and objections in some Western countries. Deals for technology companies have caused particular concerns.
The US commission, which provides non-binding recommendations to Congress, is accusing Beijing of using its huge state-owned enterprises (SOEs) as tools to advance national security goals.
"There is an inherently high risk that whenever an SOE acquires or gains effective control of a US company, it will use the technology, intelligence, and market power it gains in the service of the Chinese state to the detriment of US national security," the commission said in a report released yesterday.
Established by Congress to monitor US-China relations, the commission is known for taking a hawkish stance toward the Communist giant.
Its report was published as US President-elect Donald Trump, who has promised to get tough on China, is preparing to take charge in the White House.
On the campaign trail, Trump threatened to slap tariffs of 45 per cent on Chinese exports and label Beijing a "currency manipulator."
Chinese firms' rapidly growing investment in the US is driven by a number of factors, including encouragement from the Chinese government, slowing growth at home and looser restrictions on overseas deals.
Western countries and companies often welcome the influx of Chinese money. But critics point out that China is much less open to foreign investment in many of its own industries.
Some recent attempts by Chinese state-backed companies to acquire US technology businesses raised concerns in Washington, CNN reported.
Earlier this year, Fairchild Semiconductor rebuffed a higher offer from Chinese state-backed buyers, and instead agreed to a deal with an American rival, over an "unacceptable level of risk for a failure to obtain [regulatory] approval," according to a SEC filing.
State-owned company Tsinghua Unigroup also dropped a USD 3.8 billion investment in tech firm Western Digital (WDC) in February after US regulators said they would investigate the deal on national security grounds, the report said.
US lawmakers have also called on regulators to probe a Chinese takeover of the Chicago Stock Exchange, it said.
The US-China Economic and Security Review Commission said
that "China continues to violate the spirit and the letter of its international obligations by pursuing import substitution policies, imposing forced technology transfers, engaging in cyber-enabled theft of intellectual property, and obstructing the free flow of information and commerce."
China is also becoming a "less welcoming market for foreign investors, with a host of restrictions and anticompetitive laws that proscribe foreign participation in broad swathes of the economy and promote domestic companies.
"At the same time, the extensive subsidisation of and policy support for favored companies and sectors puts international competitors wishing to export to China at a distinct disadvantage," it said.
Further, the report said, "It has become all too apparent that the ruling Communist Party has no intention of opening up what it considers key sectors of its economy to significant US or foreign competition and control."
China's willingness to reshape the economic, geopolitical, and security order to accommodate its interests are of great concern as China's global influence grows. This influence has been manifesting most recently with China's 'One Belt, One Road' initiative aimed at connecting China with great portions of the rest of the world via a wide range of investments and infrastructure projects," the report said.
