Stop Technology Ripoffs By China

Congress should make CFIUS review a requirement prior to the sale of any U.S. company to a Chinese-controlled entity — not just to SOEs.

By Anders Corr

On November 16, a U.S. Government advisory body, the U.S.-China Economic and Security Review Commission, recommended that “Congress amend the statute authorizing the Committee on Foreign Investment in the United States [CFIUS] to bar Chinese state owned enterprises from acquiring or otherwise gaining effective control of U.S. companies.” .”

But Congress should go one step further than just banning Chinese SOEs from buying U.S. companies. 

Congress should reverse prior sales of U.S. technology firms to China, especially those in critical industries like aviation and semiconductors. 

It is because of Chinese acquisition of U.S. technology on the cheap that China can now out-compete U.S. manufacturing. 

This is not a matter of protectionism, but a matter of protecting U.S. democracy and workers from China’s autocratic government.
China’s authoritarian economy benefits because Chinese-owned U.S. companies can innovate and design new technologies in U.S. labs, and with U.S. scientists. 

These new technologies never undergo CFIUS review before getting transferred to China. 

Congress should mandate that CFIUS review, and have the authority to stop, joint development programs between U.S. and Chinese technology companies.
According to the commission, “Overall, the data do not demonstrate that CFIUS has been a significant obstacle for Chinese investment in the United States. 

In 2014, the latest year for which data are available, China led foreign countries in CFIUS reviews with 24 reviewed transactions out of more than 100 total Chinese acquisition deals.” 

As noted by the commission, CFIUS fails to review most Chinese acquisitions. 

Many technology companies, especially little-known startups, can be legally acquired by China without CFIUS ever knowing. 

The startups may not even be aware of CFIUS. 

Congress should make CFIUS review a requirement prior to the sale of any U.S. company to a Chinese-controlled entity — not just to SOEs.
Stopping the loss of U.S. technology to China is about protecting the economy, but also about protecting U.S. national security. 

“The CCP [Chinese Communist Party] continues to use SOEs [state-owned enterprises] as the primary economic tool for advancing and achieving its national security objectives,” according to the commission’s report. 

“Consequently, there is an inherently high risk that whenever an SOE acquires or gains effective control of a U.S. company, it will use the technology, intelligence, and market power it gains in the service of the Chinese state to the detriment of U.S. national security.”
Congress, which created CFIUS in 2000, typically takes a harsh view of Chinese acquisitions of U.S. technology companies. 

But recent presidential administrations respond with greater alacrity to big business lobbies like Boeing and Apple that stand to make over a trillion dollars in revenue in China over the next 20 years. 

U.S. voters, therefore, cannot trust Boeing, Apple, and their lobbyists to influence U.S. national security decisions. 

Voters should take back their government from these special interests and their Chinese conflicts of interest.
The U.S. Treasury Department chairs the CFIUS review process. 

Timothy Geithner was Secretary of the Treasury at the time that CFIUS reviewed and ultimately approved the sale of of one aviation company in 2011, Cirrus Industries of Minnesota, to the biggest Chinese state-owned aerospace-defense company, Aviation Industry Corporation of China (AVIC). Cirrus has since gained access to Oak Ridge National Laboratory (ORNL) officials, from whom they are seeking joint research and development, that is, technology transfers. 

ORNL is funded by U.S. taxpayer money, not to help Chinese defense companies, but to develop our most sophisticated materials science for U.S. military and commercial use.
Geithner joined the private equity firm Warburg Pincus after he left government service in 2013. 

There, he led the 2014 acquisition of a $680 million share of a Chinese state-owned enterprise, Huarong Bank. 

China had it in their power to handsomely reward Mr. Geithner in the 2014 transaction. 

That fact is doubtless not lost on current high government officials in Washington who hope to cash in with Chinese clients after they leave government service.

Appointments of former U.S. Secretary-level individuals to boards of directors or upper-management of U.S. companies doing business in China help China’s influence in Washington. 

It is in U.S. voter interests, therefore, to reform this and other possible paths of monetary influence on U.S. politics, and with it, end the chance of Chinese influence in the beltway. 

Campaign finance reform is needed, not just to keep corporate influence out of critical domestic issues like tax and social spending reform, but to keep Chinese and other international competitor influence out of U.S. national security decisions. 

We also need to pass stronger conflict of interest laws against high government officials taking lucrative post-government positions that profit from Chinese clients. 

The same should apply to Russian clients.
The November 16 recommendations of the U.S.-China Economic and Security Review Commission make headway against the threat of losing yet more technology to China. 

CFIUS has stopped some deals, which is to their credit. 

But the commission and CFIUS don’t go nearly far enough. 

They will need public mobilization to get the job done properly.