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Why one of China's richest men is squaring off against Obama in court

Wu Jialiang, CEO of Ralls Corp. is challenging Obama's refusal on national security grounds to let him build a wind farm in America, marking the first such high level case in the US from a Chinese firm.

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Ralls co-owner Wu, however, says he is suing because “the CFIUS definitely had political reasons [to block the deal] because we are a Chinese company.” Other firms from other foreign countries are operating wind farms on land adjacent to the restricted military area without problems, he points out. 

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This is not the first time that frustrated Chinese investors have complained about politicized hostility to them in the United States.

Last month a Congressional panel branded two top Chinese telecommunications companies, Huawei and ZTE, as potential threats to US national security, seriously undermining their prospects of doing business in the US.

(Read the Monitor's report about what happened to Huawei and ZTE here

In 2005, CNOOC’s $18.5 billion bid for Unocal foundered on Congressional opposition. In 2009, CFIUS forced a Chinese mining company to give up its bid for a goldmine in Nevada near a naval air station. Last year, Huawei backed off a plan to buy assets from US computer server firm 3Leaf in the face of CFIUS objections.

“This is not the first time that the US government turns down a Chinese investment for political reasons,” the Chinese Commerce Ministry spokesman Shen Danyang said in response to Obama’s ruling. “It is all about political interests when the politicians poke their noses into bilateral commercial and trade relations,” he added.

US officials insist that the Ralls decision signals no general hostility to Chinese investment. “The president’s decision is specific to this transaction and is not a precedent with regard to any other foreign direct investment from China or any other country,” the Treasury Department said in a statement.

Chinese investment in the US   

Indeed, the figures show that Chinese investment in the US, though still a tiny fraction of overall foreign investment there, is growing fast; a record $7.8 billion in deals had been announced this year by the end of August, according to data from Dealogic.

“The US is very, very open to investment from China … and the CFIUS process was not set up to be biased against China,” says Mr. Fagan.

But the 2007 Foreign Investment and National Security Act does establish a presumption that all purchases of US firms by foreign-state-owned enterprises will require a formal CFIUS investigation, points out Karl Sauvant, who teaches at Columbia Law School in New York.

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