Fintech

US blocks on China deals risk backlash

Actions by the US and others against Chinese acquisitions are bound to have a negative effect at a time when nations should be cooperating for shared benefit

PUBLISHED : Sunday, 07 January, 2018, 2:09am
UPDATED : Sunday, 07 January, 2018, 2:09am

Protectionism is not in the interests of any country, President Xi Jinping and other Chinese leaders have made plain. The United States obviously thinks otherwise; why else would regulators have blocked a series of planned acquisitions by companies from China, the latest being a bid by ANT Financial, an affiliate of Alibaba that owns the South China Morning Post, to buy remittance firm MoneyGram International.

National security concerns were cited as the reason for not allowing the US$1.2 billion deal to go ahead, but there are obvious doubts this is the real reason given the anti-Chinese rhetoric from leader Donald Trump and lawmakers. With Beijing having announced two months ago a widening of foreign ownership of the nation’s financial sector, such decisions send the worst of messages.

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Xi told the 19th congress of the Communist Party in October that the nation would make “new ground in pursuing opening up on all fronts”. Proving resolve, the following month Beijing announced changes that included raising the foreign ownership limit in joint-venture firms involved in the futures, securities and funds markets to 51 per cent. It was an initial response to accusations by Trump and others that China has been unfair with its trade practices and sluggish about giving overseas companies access to its financial sector.

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Such efforts are to be applauded. They ease doubts by overseas firms that China does not welcome foreign investment or allow fair access to its markets. But the encouragement from Washington and elsewhere that should be expected has not been forthcoming, as the growing list of rejected acquisitions in the US and Europe shows. Among others is the US$1.3 billion purchase of US chip maker Lattice Semiconductor Corp by China-backed buyout fund Canyon Bridge Capital Partners and a US$275 million injection in the New York-based boutique investment bank Cowen by CEFC China Energy.

It is debatable whether the ANT Financial and MoneyGram deal was a national security risk, as was decided by the Committee on Foreign Investment in the United States, the branch of the US Treasury that screens acquisitions. One concern was that personal data of American employees would be at risk – a matter that may only obliquely be linked to the nation’s security.

But there is no doubt that anti-Chinese sentiment is spreading. China can certainly be accused of protectionism, just as the claim may be made of the US, but every sign points to the trend changing. Actions by the US and others against Chinese acquisitions are bound to have a negative effect at a time when the nations should be cooperating for shared benefit. For one, as the central government has pointed out, if the US goes its own way, there should be no surprise about retaliatory measures from China.