Despite increasing sanctions and scrutiny on hostile Chinese business practices and intellectual property theft, private equity firms have previously managed to mostly evade scrutiny for taking Chinese money. That may finally be changing.
Takeaways:
“The US is starting to wise up on Chinese investments. It’s been cracking down by closing loopholes But not all the loopholes have been closed, Which means China could be getting US trade secrets.”
“Better late than never. This feels like your grandparents finally learning how to unplug and plug back in the WiFi router. Shouldn’t have taken this long to figure out something so obvious, but glad they eventually got there.”
“After years of letting China buy up sensitive US technology, property, and companies, the US government is finally putting its foot down. In 2018, Trump signed the Foreign Investment Risk Review Modernization Act, or FIRRMA. This changed how the Committee on Foreign Investment, or CFIUS, screened investments in the US for national security issues.”
“Before, CFIUS could only review foreign investments if they resulted in a controlling stake. Now CIFIUS can review any investment.”
“When Biden got into office, he ordered CFIUS to look at all investments that affect critical aspects of the US supply chain, or Americans’ personal data, and several other things.”
“As you might imagine, this has not gone over well with Wall Street, which loves Chinese money more than Snoop Dogg loves marijuana.”
“‘Wall Street now stands as an increasingly lonely voice arguing for more engagement with China.’ This was going on even as China was taking a wrecking ball to its economy with its zero covid policy, committing genocide against an ethnic minority, and selling the organs of political prisoners for profit. Find someone that loves you the way Wall Street loves Chinese money. They’re ride or die…and the people that die are political prisoners.”
“Private equity and venture capital firms were able to get an exception granted in FIRRMA for limited partners. That means that if a foreign entity becomes a limited partner in, say, a private equity fund, CFIUS doesn’t have any jurisdiction over it. Should have seen something like this coming. Finding loopholes is what Wall Street does best.”
“The type of investments that private equity firms are involved in means that Chinese companies could get access to critical technology. Stuff that could affect national security. Portfolio details could hold national economic or intelligence value.”
“The China Investment Corporation or CIC. At $1.3 trillion US dollars, it’s the largest sovereign wealth fund in the world. ‘CIC has said repeatedly that it separates commercial activities from governmental functions and makes its investment decisions independently.'”
“CIC’s board of directors includes representatives from the Chinese government.”
“CIC’s Deputy General Manager Qi Bin has explained that cooperation with developed economies is to be leveraged to obtain advanced technology.”
“CIC is also partnering with large investment companies, like Goldman Sachs, Japan’s Nomura Holdings, and France’s BNP Paribas. CIC’s Deputy General Manager Qi Bin has talked about leveraging these partnerships for the ‘win-win’ ‘mutual benefit’…of Chinese companies. Somehow I’m getting the sense that “win win” has a different meaning in China. I think in English we would call this ‘short-term win for long-term loss.’ I’ll give you my money and you give me your trade secrets.”
There’s finally some efforts for CFIUS to close private equity loopholes.
Pardon me if I express deep skepticism that the Biden White House will actually constrict the inflow of Chinese money…
[…] Somehow, I doubt recent events – the Chinese “weather balloon” – will effect the Left’s agenda to turn over all valuables to China. But, clearly, we need to. Now. […]
[…] Somehow, I doubt recent events – the Chinese “weather balloon” – will effect the Left’s agenda to turn over all valuables to China. But, clearly, we need to. Now. […]