"China is our number one adversary with respect to economic espionage." -- William Evanina

Top U.S. Spymaster Warns American Firms About Deals With China

By Sara Forden and David McLaughlin

The top U.S. counterintelligence official said American firms need to be cognizant of the national security risks that could arise from selling to Chinese buyers or entering into joint ventures with them.
William Evanina, the Director of the National Counterintelligence and Security Center, said it’s understandable that executives and owners of American companies want to do the most lucrative deals, but they don’t always understand the potential risks to national security.
Evanina’s comments come as the Trump administration and lawmakers in Washington move to toughen the framework for reviewing acquisitions by Chinese investors.
"China is our number one adversary with respect to economic espionage," Evanina said in an interview at Bloomberg in Washington Thursday. 

"Their ability to steal proprietary information and trade secrets is proficient and it’s aggressive."
Evanina’s comments show the extent of concern within the U.S. intelligence community about China’s push to acquire U.S. technology. 

A slew of proposed deals by Chinese investors have struggled to gain approval from a secretive panel that reviews takeovers by foreign buyers for national security threats.
Among the deals under review by the Committee on Foreign Investment in the U.S. are MoneyGram International Inc.’s proposed sale to Ant Financial, the financial-services company controlled by Chinese billionaire Jack Ma, and Genworth Financial Inc.’s $2.7 billion sale to China Oceanwide Holdings Group Co.

Broken Deals
Several proposed takeovers by Chinese investors have fallen apart over opposition from CFIUS. 

The latest came Tuesday when Chinese investors, led by digital-map provider NavInfo Co., called off plans to buy a stake in counterpart HERE Technologies. 

Earlier this month, U.S. President Donald Trump blocked a China-backed takeover of Lattice Semiconductor Corp. on the recommendation of the panel.
Evanina outlined a scenario in which the sale of a defense-based technology company could harm the U.S.’s ability to ensure supplies for military equipment such as fighter jets and ships.
"That’s where we have to be really creative to explain that this is a national security threat," he said. "It’s something we have to continue to drive, especially when it involves technology."
Congress is planning to reshape the CFIUS framework as concerns about China’s deal-making have intensified in Washington. 

Republican Senator John Cornyn of Texas, who has warned that Chinese investment has the potential to undermine U.S. military capabilities, says CFIUS should have broader scope to review foreign takeovers. 

The panel should examine joint ventures and minority stakes, not just acquisitions, he said at a June speech in Washington.
Evanina said he supported reforming how CFIUS works.
"The CFIUS process is old, antiquated and it’s being reformatted," he said. 

"There are a lot of people in the government working very hard to make it a useful tool for what we want to do."

Chinese bid for mapping company falls at US hurdle

Chinese seeking stake in Europe-based Here told to ‘apply directly’ to Trump 
By Yuan Yang in Beijing

Chinese investors seeking to buy a stake in a European mapping company were told to “apply directly” to the US president after their €241m offer failed to win regulatory approval, according to one of the bidders.
Beijing-based NavInfo, a mapping provider for tech giant Tencent, together with Tencent and Singapore’s sovereign wealth fund GIC agreed last year to buy a 10 per cent stake in Amsterdam-headquartered Here to provide high-resolution maps of China for autonomous cars.
The mapping technology company is owned by German carmakers Audi, BMW and Daimler, and US chipmaker Intel.
The Committee on Foreign Investment in the US weighed in on the deal, which received the green light from German regulators in January, due to Here’s assets in Chicago.
Cfius made NavInfo and its fellow investors go through multiple hoops, but did not ultimately approve the deal.
“[Cfius] didn’t stop us from reapplying again, and actually recommended we apply directly to US President Donald Trump,” said NavInfo.
“We think there are two main reasons: the whole atmosphere after the election has changed at Cfius, and we hear there are not enough employees,” the company added, suggesting the new and smaller team at Cfius was more likely to withhold approval. 
The Here decision comes at a time when China-US relations have been strained by Mr Trump’s harsh rhetoric against Chinese trade, as well as foreign policy disagreements over North Korea.
Mr Trump earlier this month blocked a $1.3bn plan by Canyon Bridge, a China-backed private equity group, to acquire Lattice Semiconductor.
Financial holdings company China Oceanwide is in the midst of re-filing an application to Cfius to acquire Virginia-based insurer Genworth Financial for $2.7bn.
As Beijing has moved to rein in an ambitious spate of offshore dealmaking by private groups, Chinese outbound investment by government-backed groups soared in the first half of the year to $28.7bn, despite scrutiny overseas over national security concerns.
“For the past six months [Cfius] has continuously asked us to change our application, but even the emails they gave us were very vague, and just mentioned ‘national security reasons’,” NavInfo said on Wednesday.
NavInfo said Cfius had told the consortium to refile its application, which it did, giving up investor rights such as shareholder votes, but the group still did not receive approval and does not understand why.
The consortium decided to drop the deal rather than apply directly to the US president, NavInfo said. The company added that although the decision changes its plans for shareholding, it will not affect its mapping projects with Here, with which it has a joint venture in China.
NavInfo said it will cancel the loan it had arranged with BNP Paribas to finance its part of the acquisition.
Tencent and GIC did not immediately respond to requests for comment.