Chinese Deals Feel the Chill From Washington
As growth slows at home, more and more Chinese companies are looking to do deals in the United States. And they are increasingly running smack into the American national security apparatus.
Such scrutiny will have implications for United States and China relations, as well as for mergers and acquisitions more broadly.
The latest Chinese deal to feel the chill from Washington was a planned $3.78 billion investment by the Tsinghua Unisplendour Corporation of China in the American hard disk drive maker Western Digital. On Tuesday, Tsinghua said it was abandoning the purchase of a 15 percent stake in Western Digital, citing a decision by the Committee on Foreign Investment in the United States to review the deal.
感受到华盛顿这股寒意的最新一宗中美交易，是中国公司清华紫光投资美国硬盘驱动生产商西部数据(Western Digital)37.8亿美元的计划。本周二，清华紫光表示将放弃收购西部数据15%的股份，援引的理由是美国外国投资委员会(Committee on Foreign Investment in the United States)决定对该交易进行审核。
What is this government body that holds such power?
The committee, better known by the acronym Cfius, has a long history, going back to the Exon-Florio amendment of 1988. At that time, there were concerns about Japanese acquisitions in the United States, a fear whose legacy is several mediocre movies like “Rising Sun,” a tale about Japanese corporate corruption, and the comedy “Gung Ho,” which starred Michael Keaton as an executive at a car plant struggling under Japanese ownership.
该委员会的缩写Cfius更为常见。它的历史比较悠久，可以追溯到1988年的埃克森-弗罗里奥修正案(Exon-Florio)。当时，日本企业在美国的收购行为引起了人们的担心。这种忧虑催生了几部平庸的电影，比如描述日本企业腐败现象的《旭日》(Rising Sun)，还有喜剧《超级魔鬼干部》(Gung Ho)。迈克尔·基顿(Michael Keaton)在后一部片子里扮演日本汽车厂的高管，在日本老板手下苟延残喘。
Since then, Cfius has grown increasingly powerful. In 2006, an uproar erupted over DP World of Dubai’s acquisition of the Peninsular and Oriental Steam Navigation Company, a British company that owned ports in the United States. Washington lawmakers from both parties attacked the deal, choosing to ignore that the United Arab Emirates is an ally of the United States. Congress again acted to give Cfius even broader reach. DP World soon sold the American P.&O. ports.
从那时起，Cfius的权力越来越大。2006年，迪拜环球港务集团(DP World)准备收购在美国拥有多座港口的英国企业铁行轮船公司(Peninsular and Oriental Steam Navigation Company)，引发了一片哗然。华盛顿的两党议员均对这宗交易进行了抨击，选择性地忽略阿联酋是美国盟友的事实。国会再次采取行动，授予Cfius更大的权限。迪拜环球港务集团很快就出售了铁行轮船在美国的港口。
Last week, Cfius issued its annual report for actions in 2014. The interagency body — it includes representatives from the Treasury, Justice and Defense Departments — is a bit secretive. All its filings are confidential, it doesn’t have a building in Washington and it lags an entire year in reporting figures.
Potential foreign acquirers make a filing for a national security review. In 2014 there was a record high of 147 filings, up from 97 in 2013. The increase in 2014 was mainly a result of acquisitions in manufacturing, primarily technology. The most filings were by China with 24. Next was Britain with 21, and after that was Canada with 15. (Yes, even our closest allies are subject to Cfius review.)
Once a filing is made, the committee can decide to do nothing or investigate further to see if the transaction presents a national security problem. In 2014, there was a record high of 51 investigations, fully a third of all filings.
After an investigation, if Cfius finds that the transaction has a national security issue, it will make a recommendation to the president, who can then decide to block the deal.
But Cfius rarely gets that far. There has been only one presidential action to block a transaction in the last five years. That was the 2012 acquisition of a wind farm by a Chinese company. Why would a wind farm implicate national security? Well, it was too close to a military base.
Instead, what typically happens is that Cfius signals to the acquirer that it will recommend against the transaction. In that case the acquirer will withdraw the transaction to avoid the public stain of a full presidential action.
This is what happened in the case of Western Digital. Similarly, Cfius has acted to block an acquisition of a gold mine by a Chinese company because it too was too close to a military base. Philips withdrew the sale of its lighting subsidiary last year under similar concerns.
Some pending deals are coming into Cfius’s cross hairs. The biggest is China National Chemical Corporation’s $43 billion acquisition of Syngenta, a Swiss giant in farm chemicals and seeds with big operations in the United States.
It may seem odd that an agriculture company would become a matter for national security, but this is all about food technology. The market is betting that Cfius is almost certainly going to require divestitures or restrictions on access of the Chinese company to Syngenta’s American operations and technology.
But it is not just food technology. Chongqing Casin Enterprise Group’s agreement to acquire the Chicago Stock Exchange has been met with heated protest. Forty-five members of Congress have sent a letter to Cfius asking the committee to block the deal on “transparency” concerns, namely that the Chinese economy and buyer are opaque and that providing access to American market and trading technology might harm the United States.
然而，不是只有食品技术才会如此。重庆财信企业集团收购芝加哥证券交易所(Chicago Stock Exchange)的申请就遭到了强烈的抗议。45位议员给Cfius发了一封联名信，要求该委员会阻止这项交易，原因是有关“透明度”方面的顾虑，即中国经济和买家是不透明的，给他们提供进入美国市场和进行技术交易的机会，有可能会给美国造成伤害。
Expect tensions to get worse. Chinese companies are desperate to get dollars out of China in anticipation of a further slide in its currency. Foreign acquisitions are an easy solution, since they are encouraged by the Chinese government. And American sellers are willing to take the risk. Indeed, pending now is Tianjin Tianhai’s $6 billion deal for the technology distributor Ingram Micro, which would be the largest Chinese acquisition of an American technology company.
To be sure, Cfius actually approves most acquisitions, even the Chinese ones. For example, it approved the acquisition of Smithfield Foods and the battery maker A123 despite some protest.
当然，Cfius 实际上通过了大部分的交易申请，甚至包括中国公司提出的那些。比如，尽管有人提出抗议，它还是批准了对史密斯菲尔德食品公司(Smithfield Foods)和对电池生产商A123的收购。
These types of national security reviews also occur in other countries, including China, and can sometimes take on an absurdist flavor. Canada, for example, reviewed Burger King’s acquisition of Tim Hortons, its national coffeehouse chain, on national security grounds. France famously stated that it would not allow the acquisition of Danone, since the yogurt maker was a national champion.
其他国家也有这类针对国家安全的审核，包括中国，而且有时候还会显得有些荒诞。比如，加拿大就以国家安全为由，对汉堡王(Burger King)收购该国咖啡连锁店蒂姆-霍顿斯(Tim Hortons)一事进行了审核。法国曾出了名地表示，它不会允许外国公司收购达能(Danone)，因为这家酸奶生产商是国宝。
But we are entering into a new phase with Chinese acquisitions. The United States’ national security service, never considered a transparent process, is going to have to grapple with how far it can allow these Chinese companies to go. When is food technology important? Is a stock market really something that needs protection, particularly one that is dying?
If you want to know how heated these debates can become, think about what is going on with Apple now and the controversy over whether it should be forced to unlock an iPhone. Then imagine a foreign company is substituted for Apple.
Would it be better to let the money in, as we did with the Japanese, and watch them overspend and mismanage? After all, even in the best of times foreign acquisitions are difficult. And it may just be that this money and new viewpoint will make American companies better.
And ultimately, there is the issue of xenophobia and commerce. These acquisitions create value for the United States. Is blocking them based on rationality, or simply on fear?
Deal-making, particularly cross-border deal-making, is always hard, but it is about to get much harder over the next few years as the United States decides how vigorous its national security review process will be. This will be a debate that will primarily be about China.