Amid the current trade war, the Trump Administration has been paying close attention to Chinese companies' investment in mergers and acquisitions in the US market. Recently the US Treasury Department said they would tighten foreign investment rules in sensitive industries such as the technology and telecommunications sectors in November, and begin enforcing a law aimed at restricting Chinese investment in 27 sensitive industries, including airplane manufacturing, engine production and semiconductors, according to China Trade News. The Committee on Foreign Investment in the United States (CFIUS) is authorized to do the job.
Liu Ying, a researcher with Chongyang Institute for Financial Studies at the Renmin University of China, told China Trade News that the US has applied trade protectionism to the science and technology sector, and its purpose is to play a dominant role in the high and new technology industry.
This will be a shock for Chinese companies doing business in the US and others preparing to do so, economist Song Qinghui said. It will directly lead to a further downturn in transactions between Chinese companies and US ones, which have already declined sharply since the second half of 2017. Although Chinese companies prefer to invest in the US, given its huge developed market, Song said they should be very cautious as the scrutiny of the CFIUS will create great uncertainty.
Luo Xiaojun, the co-founder of Morning Whistle Group, a provider of cross-border mergers and acquisitions services, said this was not unexpected as the US has been considering the move for years. It does not mean Chinese companies can't invest in any of the 27 industries, because the US has many standards, like industry standards, to judge whether foreign enterprises can enter the US. Besides, projects in early stages or involving technologies with declining profitability would be easier to get approved, Song added.
Chinese enterprises should look to other nations and regions, Liu said. There is no doubt that the US market is a good place to do business given the large market and positive business environment, but the US is not the only nor the best destination for Chinese investors. Liu said countries in the “Belt and Road Initiative” are a potential consumer market, and they are also a fine choice for Chinese investors with long-term vision.
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