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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“Since 90 percent of China’s outward investment comes from state owned enterprises, and China is unique in that … Chinese enterprises get more attention” from CFIUS than companies from other countries, says Dr. Sauvant, author of a book “Is the US Ready for FDI From China?”Skip to next paragraph
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“CFIUS was established in reaction to a jump in Japan’s foreign direct investment, and it was strengthened in response to a rise in China’s investment” in the US, says Sauvant.
‘Sounds like discrimination’
And, because of where they come from, acknowledges Fagan, “there is no question that Chinese transactions present more complexities than transactions from other countries.”
“One thing the process takes into account is the country of the investor, the capability and record of that country, including surveillance and spying, that might threaten US national security,” Fagan points out. “Investors from certain countries, including China, face greater scrutiny.”
Most Chinese investment deals in America go through without a hitch, says Sauvant, but the lesson of the Ralls case and others, he says, is that “whenever something is in a sensitive sector or involves larger, more visible projects, Chinese investors would be well advised to prepare the ground very carefully in Washington.”
To Chinese ears, that sort of caveat sounds like discrimination. “The US government and people do not think the Chinese government is 100 percent like other ones,” says Mr. Hao, the lawyer. “They always have doubts; it is cultural and political discrimination.”
Ralls CEO Wu complains that the presidential order “branded Sany, which is a good corporate citizen and a good company, as criminals. What kind of signal are they sending – that Chinese companies are not welcome to invest in America?”
“This will undermine other Chinese firms’ confidence about investing in America,” Wu adds.
Wu is also looking to officials in Beijing for support. “The relationship between the government and companies is like the relationship between parents and their children,” he argues. “We left home, went far away, and got bullied. But the US has many children in China; if they bully our children, can’t China bully theirs? Are Boeing planes safe to fly, for example?”
The Ralls case is unlikely to be the last of its kind, observers predict. But as Chinese companies ramp up their foreign acquisitions, it marks the first time that a Chinese firm has launched such a high level legal challenge to what it says is an unjust US ruling.
“This could well be an indication of things to come,” suggests Sauvant, “when Chinese investors will stand up if they feel they have been badly treated. One could argue that this is a straw in the wind.”