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REGIONS AMERICAS


WE’VE SEENSOMEPOSITIVE SIGNS FROM THE PRESIDENT ELECT ABOUTWANTING TO REBUILD RELATIONSHIPS WITHOURALLIES


CanBidenfixCFIUS? T


INVESTMENT SCRUTINY WILL BE JUST AS TOUGH ON CHINA UNDER THE INCOMING ADMINISTRATION. DANIELLE MYLES REPORTS


he intense scrutiny faced by Chinese investors in recent years is tipped to continue


under Joe Biden’s incoming adminis- tration.However,MrBiden’s multilat- eral approach has buoyed hopes that investors from US allies are less likely to be caught in the crosshairs. The Committee on Foreign Investment in the United States


(CFIUS), which screens inbound acquisitions for national security threats, rose to promi- nence under president Donald Trump, thanks to its intervention in high-profile Chinese deals involving the apps TikTok, Grindr and StayNTouch, and various semiconductor companies. It is widely-accepted that Mr Trump has


used CFIUS as a tool in his ‘America First’ policy and China trade war, but statistics showthe US started to toughen its stance on Chinese invest- ment long before he entered the White House. “This extra scrutiny is not a Trumpphenom-


enon,” says Anne Salladin, a partner at Hogan Lovells who worked for CFIUS for almost two decades. “It has been going on since around 2012, when the US started to see an extraordi- nary increase in Chinese investment.” That was the year then-president Obama ordered Chinese-controlled Ralls to unwind its acquisi- tion of wind farms near a US military base. Further evidence that scrutiny will con-


tinue is the overwhelming bipartisan support for the Foreign Investment Risk Review Modernisation Act (Firrma) which recently expanded CFIUS’s powers in areas fervently pursued by China — namely, personal data, new or advanced technologies, and critical infrastructure. It is an ominous sign for Chinese invest-


ment which, according to the Rhodium Group, totalled just $5bn last year—down90% on 2016 and the lowest level since 2009. A spokesperson for the US–China BusinessCouncil tells fDi that “the hostile environment created by the trade war and increased scrutiny of planned Chinese investment are direct causes of the nosedive”.


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Leeway for trade partners Since starting his presidential campaign, Mr Biden has made no specific comments on national security review. But his desire to work with governments whose interests align with the US means the list of countries excluded from Firrma’s broad remit — which captures even minority stakes and board positions — is tipped to grow. “I’d expect less of a pushfor reviews on com-


panies from allied countries, and I suspect the ‘white list’ of countries — which are exempted fromsome of the more restrictive requirements — will probably be expanded,” says Martin Chorzempa, a research fellow at the Peterson Institute for International Economicswhostud- ies CFIUS. Today, that list includes Canada, the UK and Australia; but the committee, com- prised of the heads of the federal government’s economic and security agencies, has discretion to add other countries with sufficiently robust FDI screeningmechanisms. The top candidates are Japan, France,


Germany, Switzerland and the Netherlands — some of which have tightened their reviewpro- cedures of late. In 2019, Swiss investment firm Partners Group, Japan’s Denso andSwedish pri- vate equity firm EQT pushed for their respec- tive countries to be included on the list.


FDI frameofmind The country’s first federal agency tasked with attracting investment, SelectUSA, was estab- lished during Mr Biden’s vice-presidency and some are optimistic that this recognition of FDI as an economic priority will be reflected in his cabinet picks. Ex-CFIUS officials confirm that the career


civil servantswhoreview transactions take cues frompolitically-appointed superiors. “My hope is that any administration that prioritises FDI will ensure that CFIUS reviews take into account the importance that FDI brings to the economy,” says Nancy McLernon, CEOof Global Business Alliance which represents foreign companies’ US operations. “Our members have been concerned by the


www.fDiIntelligence.com December 2020/January 2021


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