No Country for Predatory China

Doors Slam Shut for China Deals Around the World
Tighter rules for CFIUS are echoed in great scrutiny from Europe to Australia.

By Nisha Gopalan
Ant Financial’s Alipay: Rolling in Japan, but MoneyGram was off limits.
Doors are slamming shut in the developed world not just to Chinese investment in technology but potentially to a wave of acquisitions with a tech element, as diverse as smart heaters and robotic lawnmowers.
President Donald Trump last week signed an update to legislation for the Committee on Foreign Investment in the U.S. that broadened the inter-agency vetting committee group’s scope to encompass even minority and passive investments in three areas: Critical technology, infrastructure, and businesses that handle personal data. 

This tightening of the rules has been happening for some time, but it’s now explicit.
Just ask Jack Ma, who earlier this year had to abandon Ant Financial’s bid for MoneyGram International Inc. amid CFIUS concerns that malicious China could obtain data on U.S. military personnel who use the payments service. 

Or Broadcom Ltd., whose $117 billion bid for Qualcomm Inc. was rejected by Trump after the committee worried that the deal, and the inevitable post-merger cost-cutting, would give China’s Huawei Technologies Co. a tech leg-up.
But there’s more to this CFIUS update.
In the past, “notifications to CFIUS were voluntary, at least until CFIUS came knocking,” said Rod Hunter, a Washington-based trade partner at Baker & McKenzie LLP. 

Now, an acquirer planning to invest in anything remotely “smart” in the U.S. stands to be investigated.
Ambiguity abounds: What kinds of “personal data” are vulnerable in a world where pretty much every company must seek to monetize such information to get ahead? 

If all information is critical infrastructure, can any Chinese incursion come in under the radar? 

Would Haier Group Corp.’s purchase of General Electric Co.’s home-appliance business a couple of years ago – partly to leverage the American company’s smart-home technology – get the green light now?
China’s challenges aren’t limited to U.S., or to similar stances in Australia and Canada. 

Europe, the favored destination of late, is getting a lot tougher.
This month, Chancellor Angela Merkel’s government vetoed for the first time a possible Chinese takeover of a German company, blocking the bid for a machine-tool manufacturer, Leifeld Metal Spinning AG. 

Berlin is still reeling from the outcry sparked two years ago by Midea Group Co.’s purchase of Kuka AG, a robotics firm, and wants to lower the threshold at which it screens non-European Union acquisitions from the current 25 percent. 

Even the U.K., keen to cultivate China as Brexit looms, is proposing removing thresholds for small takeover targets, minority stakes, or even the acquisition of intellectual property.
That's not to say Beijing will have to give up all of its Made in China 2025 ambitions. 

As my colleague Noah Smith has written, joint ventures are still a way to acquire coveted technology. 

And when all else fails, China can wave its own antitrust stick. 

You can blame the current trade spat, but it’s hard not to connect President Trump’s veto of Broadcom-Qualcomm with the U.S. chipmaker’s failure to win Chinese approval of its pursuit of NXP Semiconductors NV this summer.
The fact remains that China doesn’t have a lot of options for bringing in the technology it needs. 

That puts Beijing on the back foot, under pressure to play fair and open its market to the rest of the world.
China has already promised to permit investment its financial sector, after decades of complaints from Wall Street, and now is making it easier for foreign buyers to take strategic stakes in domestically listed companies in many industries. 

That may eventually be seen as the kind of reciprocal treatment Western governments want. 

For now, though, the world’s doors are shutting to Chinese investments.

Chinese Peril: The U.S. Is Leaning on Germany to Block a Chinese Takeover.

It already killed a Chinese bid for Philips LumiLED business
By Reuters

The US is getting very touchy about Chinese access to LED technology.

U.S. intelligence services warned Berlin that a now on-hold Chinese takeover of German semiconductor equipment maker Aixtron could give Beijing access to technology that could be used for military purposes, business daily Handelsblatt said.
The German Economy Ministry said Monday it had withdrawn its approval for Fujian Grand Chip Investment Fund (FGC) to buy the Aachen-based firm for 670 million euros ($732 million), citing security-related information.
The ministry declined to comment further in light of the Handelsblatt report on Wednesday and said it could give no details on the “origin or the nature” of the information that led to clearance being withdrawn.
A spokeswoman added the review would likely take between two and three months once the ministry had collected all relevant documentation.
Aixtron shares dropped 7.1% in Frankfurt Wednesday to a five-month low of 4.84 euros, well below the 6 euros per share that FGC had offered shareholders for their stock.
The newspaper, citing German intelligence sources, said U.S. authorities had shown representatives of German ministries evidence last Friday, at a meeting at the U.S. embassy in Berlin, although they refused to hand it over.
Concern is growing in Berlin about losing key technology to China after a string of Chinese acquisitions of German companies, including robotics group Kuka AG. 

However, many are niche companies that, while dominant in their particular specialties, are nowhere near big enough to deter predators from China, which has spent nearly $200 billion on foreign acquisitions this year alone.
Aixtron sells its equipment, which is used to deposit chemical layers on silicon wafers, mainly to LED (light-emitting diode) chipmakers. 

It is not designed for military purposes but analysts say it could be adapted, with some difficulty.
The U.S. Committee on Foreign Investment in the United States (CFIUS), which reviews takeovers from a national security perspective, in January blocked a plan by Dutch company Philips to sell its Lumileds LED business to Chinese buyers.