Nexen deal shows how Chinese firms can do business in US
John Gong says China's 'going out' strategy faces many challenges, particularly in America
The fact that China National Offshore Oil Corporation's US$15.1 billion acquisition of Calgary-based Nexen went through successfully, with the required US approval, shows that direct investment capital flows from China are not always subject to political hijacking, as many on the mainland claim.
This acquisition came under US jurisdiction because of the Canadian company's oil and gas operations in the Gulf of Mexico. The group that handles regulatory oversight and approval of foreign investments in the US is an obscure inter-agency body of government called the Committee on Foreign Investment in the United States (CFIUS).
Its creation can be traced back to an executive order issued by president Gerald Ford in 1975. Today, members include the attorney general, labour secretary, director of national intelligence and several other cabinet members.
To be fair, while members are not entirely immune from ideological inclinations or insulated from political pressure, the process itself remains mostly bipartisan, as it adheres to a set of pre-determined principles unrelated to politics.
The committee typically examines the national security significance of the acquisition target and the consequences of foreign control.
For example, critical infrastructure, defence suppliers and those possessing sensitive technology are usually off-limits as acquisition targets. Access to military technology or secrets and control over critical defence resources such as energy or transport are bound to be rejected.
However, in a democracy such as the United States, one could expect voices of objection, for all kinds of reasons. Some object purely on ideological grounds; there are still people in the US who see China as a red communist state. There is still wide distrust of Chinese companies, particularly state-own enterprises such as CNOOC. Others probably object for competitive reasons. A competing bidder has every reason to inflame anti-China rhetoric in an effort to derail a Chinese company's offer.
