He Weiwen: US blocks Chinese company’s Aixtron bid over security concerns


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He Weiwen: US blocks Chinese company’s Aixtron bid over security concerns


Source: Global Times    Published: 2016-12-4


US President Barack Obama has blocked a Chinese company`s proposal to purchase Germany-based semiconductor equipment producer Aixtron SE, citing "national security" as a reason.

In response, Chinese Foreign Ministry Spokesman Geng Shuang warned against interference. The acquisition is "a normal business activity," he said.

Experts said the US government will give more scrutiny to Chinese investors` merger and acquisition (M&A) cases in the country once Donald Trump takes office, as the President-elect is poised to impose higher standards of approval and carry out the "reciprocal opening" principle in foreign investment.

The Chinese company, Fujian Grand Chip Investment Fund, made an offer in May to take over Aixtron, including a subsidiary based in California, in a deal worth $714 million.

Analysts said the proposed deal would "provide the company with financial resources to deepen research and development."

But on Friday, the White House said it would bar the acquisition, following the recommendation of the Committee on Foreign Investment in the United States (CFIUS).

Aixtron`s US business represents about 20 percent of the company`s total sales, which is why the Treasury Department has a say in the deal.

The Treasury Department claimed the CFIUS review found that the deal could potentially transfer sensitive technology with military application to Chinese hands.

The "CFIUS and the president assess that the transaction poses a risk to the national security of the US that cannot be resolved through mitigation," according to the Treasury`s statement.

The Germany semiconductor manufacturer was not available for comment as of press time. But on Saturday, Bloomberg quoted Aixtron`s company statement as saying that "the presidential order was limited to the US business and did not prohibit the acquisition of Aixtron shares."

In an earlier statement prior to the CFIUS announcement on Friday, Aixtron said it will have to "take actions to balance income and costs, including potential job cuts" if the takeover is blocked, Reuters reported.

Although it is not clear what Aixtron`s next move will be, "there are several months left for public relations companies and law firms to lobby against the US recommendation and convince (the government) that Chinese investors will not utilize semiconductor products in the military sector," He Weiwen, an executive council member at the China Society for the WTO, told the Global Times on Sunday.

But "it`s difficult to change the US stance," Zhang Jiayuan, an analyst with China Investment Consulting Co, told the Global Times on Sunday, noting that although Obama will leave office soon, it is highly likely that Trump will uphold Obama`s stance, especially considering his campaign rhetoric.

Trump has said that China follows unfair trade practices and in response, he will impose stricter restrictions on US exports to China and a 45 percent tariffs on Chinese imports.

"There are differences between campaign rhetoric and policy, but Trump`s comments have sent a signal that he is going to implement higher standards for approval in Chinese M&A cases, especially when concerns over security are raised," He said.

Trump is likely to highlight the principle of "reciprocal opening" after he becomes president, in which sectors where Chinese companies invest in the US are also required to open to US counterparts, experts forecast.

A number of bids by Chinese investors were turned down by US authorities in recent months.

For example, Blackstone abandoned plans to sell a landmark Southern California hotel to China`s Anbang Insurance in October, after the CFIUS raised concerns that the hotel was too near a US major naval base, the 21st Century Business Herald reported.


He Weiwen is a senior fellow at Chongyang Institute for Financial Studies, Renmin University of China.