- The Washington Times - Monday, June 3, 2013

From the AMC movie theater chain to the personal computer lines once owned by IBM to the country’s biggest hog farmer, Chinese investment in America is on a record pace, with the ring of the cash register drowning out security concerns in a rebounding U.S. economy.

During the past 15 months, Chinese businesses spent more on U.S. deals than in the previous 11 years combined, and — despite some high-profile rejections — the U.S. government may be more willing to allow Chinese companies to buy out their American rivals.

“State governments all want the Chinese investment, because they need jobs,” said Siva Yam, president of the U.S.-China Chamber of Commerce, based in Chicago. “They welcome them with open arms.”

Chinese bids for U.S. companies that are still under discussion or awaiting approval total more than $10 billion, according to Rhodium Group, a New York-based research firm. That’s the largest such backlog ever recorded.

“Very few deals actually get turned down,” said Bill Reinsch, president of the National Foreign Trade Council. “A good number get approved with conditions, and then some just get approved.”

The trend is not without its critics, though, and the issue of rising Chinese investment and the still-high Chinese trade surplus with the United States may come up when President Obama travels to California on Friday for his first summit with new Chinese President Xi Jinping.

Critics point to a significant government and military stake in many of the Chinese companies seeking acquisitions abroad, along with fears that sensitive technology or security information could be compromised. The acquisitions, including the record-setting $4.7 billion offer last week by Shuanghui International for Virginia meat-packing giant Smithfield Foods, are also seen as a shortcut for Chinese companies — which to date have a poor record at creating powerful international consumer product brands — to raise their profile.

Chinese companies have shown particular interest in gaining a foothold in U.S. industries, such as high-technology, natural resources, finance, farming and real estate.

The Smithfield purchase would help Shuanghui do just that in the meat industry, according to Christopher Leonard, a fellow at the New America Foundation, a Washington-based nonpartisan think tank.

Shuanghui has been trying to learn trade secrets in the U.S. meat industry for years, and this would give it a chance to “buy our knowledge,” Mr. Leonard said. He pointed out that Shuanghui will now have access to the technology and pig genetics that have given American meat producers a competitive edge.

With this sale, Shuanghui would be able to take these trade secrets home and “bolster” the Chinese meat industry against U.S. producers.

“I think a big reason why a Chinese company would want to buy Smithfield is to gain access to its technology and the genetics of the pigs,” Mr. Leonard said. “The pig genetics is like the secret sauce of the industry. These are some of the most valuable trade secrets, and now China can own them and bring them home to build China’s domestic pork industry.”

Changing attitudes

Chinese-based interests control the AMC movie theater chain and the personal computer lines once owned by IBM, and have a significant minority stake in investment banking giant Morgan Stanley.

The U.S. government has clearly become more welcoming of Chinese direct investment coming out of the recent deep recession, analysts say, because the economic benefits now trump national security concerns.

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