Lawmakers Worry About Chinese, Russian Companies Buying U.S. Businesses

Watchdog asked to review scope of commission overseeing national security implications of foreign acquisitions

ChemChina

ChemChina building / AP

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U.S. lawmakers are pushing for a review of the federal committee that assesses the national security implications when a foreign company buys a U.S. business, amid concerns about state-controlled Chinese and Russian companies acquiring American assets.

The Committee on Foreign Investment in the United States is authorized to review transactions resulting in foreign control of U.S. businesses in order to determine the resulting implications for national security. The committee was established through executive order in 1975 during the Gerald Ford administration, but its procedures have not been significantly updated since 2008, a fact that lawmakers say warrants a review by the Government Accountability Office.

Fifteen U.S. representatives, led by Rep. Robert Pittenger (R., N.C.), a member of the House Committee on Financial Services, penned a letter to the GAO last week requesting a report on the foreign investment committee "to determine whether its statutory and administrative authorities have effectively kept pace with the growing scope of foreign acquisitions in strategically important sectors in the U.S."

"As we prepare for the upcoming presidential transition, now is an opportune time for GAO to review what has worked well, and where CFIUS authorities may need to be expanded, especially given the rise in state-owned enterprises and state-controlled enterprises from China and Russia, among other designated countries," they wrote.

Pittenger told the Washington Free Beacon that the steep increase in Chinese investment in the United States in recent years compelled him to ask for the review. Chinese direct investment in the U.S. economy is expected to balloon to a record $20 billion to $30 billion this year, an increase from $15 billion last year and $11.9 billion in 2014.

Pittenger said that he is worried about the potential economic and security threats of Chinese acquisitions of American companies, concerns that are exacerbated by China’s provocations in the cyber realm.

"I’m not opposed to Chinese investment, but I am concerned about Chinese-affiliated entities that would make these investments and particularly those that have a strategic security threat, and the intent is to identify which ones have a threat," Pittenger elaborated. "When you’re talking today about technological providers, semi-conductor technology that is important to our defense system and information warfare—this is all new relative to the Ford administration."

"This is a more complex global economy and we have a complex relationship with China. As China is pursuing cyberwar and currency manipulation, the saber-rattling they have had against America, we need to be prudent in terms of our oversight," Pittenger continued.

The North Carolina Republican has previously spearheaded efforts to urge the committee to probe Chinese investments, joining 45 lawmakers in February asking for an investigation into the planned acquisition of the Chicago Stock Exchange by the Chongqing Casin Enterprise Group, which was founded using assets originally owned by the Chinese government. The deal is expected to be completed later this year.

Lawmakers have also sought to deter U.S. telecommunications companies from doing business with Chinese equipment makers such as Huawei Technologies Col Ltd and ZTE Corp, given possible Chinese state influence on them and accompanying security concerns.

Pittenger said Monday that, while the Russians have not pursued acquisitions in the United States to the "strategic" level that the Chinese have, he believes that it is a future possibility.

"They have some real estate holdings that I am aware of, but they haven’t gone to the strategic [level that China has]," Pittenger said of Russia. "I think we should always be vigilant and be on guard that they might. There are four nation states we have enormous threats from: Iran, North Korea, Russia, and China. China is the country we do the most trade with. … We do virtually no trade with North Korea and Iran and minimal trade with Russia, so that’s why China is the focal point."

The lawmakers expressed particular concern in the letter over foreign acquisitions of businesses in the telecommunications, media, and agriculture sectors. They cited ChemChina’s $43 billion acquisition of Syngenta, an agricultural seed and chemical company, as well as Dalian Wanda’s acquisition of movie studios Legendary Entertainment and Paramount Studios and theater chains AMC and Carmike.

The Dalian Wanda acquisitions have previously been flagged as possible threats to national security given China’s efforts to exert "soft power" and disseminate pro-China material. A new project by the Center for American Security launched this summer is raising awareness about the connections between the government of Beijing and Chinese firms that have purchased American communications assets.

Pittenger said that the Dalian Wanda acquisitions could give China the "ability to control messaging" and spread "propaganda" in the United States. He also said the United States needs to be aware of similar threats from Russia, which has engaged in a multi-million-dollar disinformation campaign in Europe.

Pittenger and his colleagues want auditors to answer several questions about the authorities of the committee with respect to these concerns, including whether existing government controls and processes can effectively protect national security in the event of "massive" Chinese commercial and economic activity inside the United States.

They also want auditors to determine whether there should be "special consideration given to companies that may be under state control from designated countries, especially China and Russia" and whether foreign acquisitions from these countries should be subject to mandatory notification to the CFIUS.

The Committee on Foreign Investment in the United States did not return a request for comment. A representative for the GAO told the Free Beacon that the watchdog has received the request and will make a decision in the coming weeks following a normal review process.

Morgan Chalfant   Email Morgan | Full Bio | RSS
Morgan Chalfant is a staff writer at the Washington Free Beacon. Prior to joining the Free Beacon, Morgan worked as a staff writer at Red Alert Politics. She also served as the year-long Collegiate Network fellow on the editorial page at USA TODAY from 2013-14. Morgan graduated from Boston College in 2013 with a B.A. in English and Mathematics. Her Twitter handle is @mchalfant16.

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