More scrutiny on Chinese M&A targeting US as congress advised to block state-owned takeovers

William Turvill
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China-to-US M&A has reached record levels this year (Source: Getty)

Chinese takeovers are coming under increasing scrutiny in the United States, with congress now advised to ban state-owned firms from acquiring American companies.

China-to-US mergers and acquisitions (M&A) activity has smashed previous records so far this year, with Dealogic tracking 146 deals worth $60.7bn so far this year – up from 117 deals worth $12bn at the same stage last year.

These levels were put in jeopardy by the election win of Donald Trump, who made his opposition to Chinese dealings in the US clear in the run-up to the vote.

Read more: Are iPhones about to become a bargaining chip in Trump's China trade talks?

Alongside this, the US-China Economic and Security Review Commission yesterday said China’s ruling party has used state-backed enterprises to “pursue social, industrial, and foreign policy objectives”.

The commission recommended: “Congress amend the statute authorising the Committee on Foreign Investment in the United States (CFIUS) to bar Chinese state-owned enterprises from acquiring or otherwise gaining effective control of US companies.”

The recommendation has not gone down well in China. Foreign ministry spokesman Geng Shuang said the report “revealed the commission’s stereotypes and prejudices”.

Read more: Donald Trump presidency could be a threat to record China-US M&A levels

Reuters reported him saying at a daily news briefing: “We ask that Chinese companies investing abroad abide by local laws and regulations, and we hope that relevant countries will create a level playing field.”

Dennis Shea, chairman of the US-China Economic and Security Review Commission, told a US conference: “We don’t want the US government purchasing companies in the United States, why would we want the Chinese Communist government purchasing companies in the United States?”

Commenting on the report, Mergermarket Americas research editor Elizabeth Lim said: “Ultimately, congress will have to decide as a whole if they want to change CFIUS’ mandate or not, and if so, to what degree.

“There does appear to be strong sentiment coming from the Trump camp and their supporters that some action needs to be taken, but again it is too early to tell at this stage what that might be.”

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