National security review process 'lacks transparency'
The U.S., through a secretive yet powerful panel, has successfully blocked another bid involving Chinese companies, this time involving a minority stake in a European mapping services provider, citing national security concerns.
The move showed that the U.S., which increasingly feels its dominance in technology and other areas is threatened by China's rapid development, is extending its reach in interfering with normal, legal deals that involve Chinese companies, a Chinese expert said on Thursday.
Companies feel that there are daunting hurdles posed by the U.S. process, which they said lacks transparency, one source familiar with the process said.
Chinese mapping technology company NavInfo Co on Tuesday announced that a bid proposed last year with Tencent Holdings and Singapore's sovereign investment fund GIC to buy a 10 percent stake in Netherland-based mapping technology company HERE International BV was abandoned because the plan failed to win regulatory approval from the U.S.
Announced in December 2016, the deal was to purchase the stake in HERE currently indirectly held by German carmakers Daimler AG, BWM Group and Audi AG. But the transaction faced hurdles after the Committee on Foreign Investment in the U.S. (CFIUS) launched a review of the proposal because HERE has business operation in the U.S.
Despite active cooperation with the panel and a huge amount of work during a five-month review period, "the transaction still has not been approved," NavInfo said in a statement.
Though the plan was ditched, the companies said that their cooperation through other channels would continue. HERE said in a statement that a plan involving HERE, NavInfo and Tencent to form a strategic partnership in China would go ahead and a planned joint venture between HERE and NavInfo remained on track.
The failed Chinese bid represents another victim of the U.S. government, which earlier this month blocked a deal for Chinese-backed investment fund Canyon Bridge Fund to acquire U.S. semiconductor producer Lattice.
"I think the pattern is very clear that the U.S. is using everything, from a Section 301 investigation to these national security reviews, to block Chinese capital from buying foreign companies in areas they think are sensitive and could help China to challenge them in technologies and other things," Chen Fengying, a research fellow at the China Institutes of Contemporary International Relations (CICIR), told the Global Times on Thursday.
Chen was referring to an earlier decision by the U.S. to initiate an investigation into China's intellectual property practices under Section 301 of the Trade Act of 1974.
"This is a full-fledged effort on the part of the U.S. to do everything to stop China from advancing in core technologies such as autonomous driving, semiconductors and so on," Chen remarked.
NavInfo and the Chinese companies are working together to provide mapping and locations services that could help the development of driverless cars, according the companies.
The tools that the U.S. is using lack transparency, according to a source with direct knowledge of the CFIUS review process for the HERE deal.
"The CFIUS review was not very transparent … they just said that the deal couldn't go ahead because of U.S. national security," said the source, who spoke on condition of anonymity because he was not authorized to speak publicly on the matter.
"I think that maybe it was due to the sensitivity of map data and citizen data," the source told the Global Times, describing the review a daunting process.
Immediately after the CFIUS decided to initiate a review into the deal and posed many questions for the companies, the companies knew that the deal they felt so confident about could be derailed, according to the source.
After going through the process, the companies were mentally prepared that the deal might not get approval and they finally scrapped the deal, according to the source.
Chen from the CICIR noted that such obstacles from the U.S. for deals that involve Chinese companies would "only increase" in the future.
"The companies should find other ways to make deals overseas such as forming consortiums with foreign companies … but more importantly, they should focus on improving their core technologies," she said.
