No Great Wall against Chinese Investment in the United States

For once, American and Chinese pundits seem to think alike: There is a budding Great Wall, reinforced by hostile political sentiments in the United States (US) and, above all, the sinister Committee on Foreign Investment in the United States (CFIUS), that is raising increasingly high obstacles to Chinese foreign direct investment (FDI). Of course, it would be odd if Washington did not scrutinize Chinese investments involving the semiconductor sector, putting Chinese businesses on the doorstep of US military facilities, or entailing critical infrastructure. Indeed, one cannot imagine Beijing accepting an American takeover of a leading Chinese semiconductor firm, a transaction that took place next to China’s Ningbo naval base, or a merger which gave an American business ownership of the Tianwan nuclear power facility. But statistics do not lie, right? CFIUS data shows Chinese deals topped the list of its security reviews of mergers & acquisitions for the third straight year. Moreover, of the 147 deals reviewed in 2014 the most (24) involved Chinese firms! Yet, the statistics indeed are misleading when viewed in isolation. First, 21 deals involving the United Kingdom also were reviewed. Clearly, all kinds of countries are scrutinized. Second, as others have observed, it is logical CFIUS is reviewing more Chinese deals given the surge in Chinese efforts to invest in the US. Even so, the number of reviews relative to the total number of Chinese M&A deals completed actually was lower in 2014 than many past years. Third, Chinese investments reflect a shift to more sensitive areas. Fourth, Chinese acquirers often are Chinese state-owned enterprises, which increases the likelihood of scrutiny. Finally, Chinese FDI in the US has hit record highs almost every year since 2010. Simply put, a Great (American) Wall against Chinese investment is not only un-viewable from space, it does not exist!