US legislative risk looms for expanding Chinese firms
Proposed legislation on foreign investments could complicate the acquisition plans of Alibaba and other Chinese companies in the United States.
Proposed legislation on foreign investments could complicate the acquisition plans of Alibaba and other Chinese companies in the United States.
If enacted into law, the bill, called HR 5881, would extend the reach of reviews conducted by the Committee on Foreign Investments in the United States (CFIUS) to include the "net benefit" of any transaction between a foreign and a US company.
CFIUS is the inter-agency committee tasked to assess the national security implications of mergers, acquisitions and takeovers that could result in foreign control of any US business.
An expert on the CFIUS process, however, sees no strong support for the bill, which was introduced on September 22 by congresswoman Rosa DeLauro. She had opposed the US$4.7 billion deal by Chinese meat-processing giant Shuanghui International to buy American firm Smithfield Foods last year.
"The Obama administration has made a major push this year to promote foreign investment in the US. I believe they would oppose any legislation that would have the effect of discouraging foreign investment - especially if it would expose foreign investors to subjective judgments that cannot be quantified or predicted," said Christopher Brewster, a special counsel for national security, CFIUS and compliance at the US law firm of Stroock & Stroock & Lavan.
The DeLauro bill proposes an overhaul of CFIUS so that it adds a net benefit assessment by a panel comprising the heads of the departments of commerce, justice, labour and treasury, and the US Trade Representative. Brewster told the that net benefit was described in the bill as the effect of the transaction "on the level of economic activity" in the US, including "the level and quality of employment" and "the effect of the proposed or pending transaction on the productivity, industrial efficiency, technological development, technology transfers and product innovation". It also seeks to factor in US "cultural policies" and the "effect on the public health, safety and well-being of US consumers".
