US to increase scrutiny of Chinese companies
Sunday, 17 January 2010
By Kathrin Hille in Beijing and Stephanie Kirchgaessner in Washington (Financial Times)
Chinese companies are expected to face tougher scrutiny in the US following Google's announcement that its systems and those of 20 other companies had been attacked by hackers in China.
Huawei, China's largest telecommunications maker, among others has already faced roadblocks when seeking to invest in the US, win government contracts or sell products considered vulnerable to security leaks.
"This will increase the intensity of already substantial reviews of Chinese transactions in areas related to national infrastructure, which includes technology," said Jamie Gorelick, who served as deputy attorney-general during the Clinton administration and is now a partner at law firm Wilmer Hale.
China, meanwhile, has sought to soften its stance over the Google threat, with the Ministry of Commerce releasing a statement on Friday saying any decision by Google to withdraw from China would not affect Sino-US trade relations.
The Obama administration signalled its concern about Chinese investment in critical infrastructure when it made clear that it was prepared to reject a bid by a Chinese company to invest in a small Nevada gold mining operation because it was located near a naval air station.
The Google fracas might also spell trouble for Chinese companies already operating in the US.
"This is clearly a step back for a number of companies in this country on a very broad level," said an executive at a technology company who asked not to be named. "It might not mean that we will be losing orders, but this will make for a less conducive environment."
A source close to Huawei said: "My first gut reaction to the Google news was, this doesn't add any brownie points. This brings the issue about trust to the fore again."
Huawei's rapid growth in emerging markets and Europe has helped it squeeze aside global rivals and become the second-largest telecom equipment maker after Ericsson.
However, it has struggled to make inroads in the US because many corporate and government officials fear that telecom infrastructure made by the Chinese company could compromise their systems' security.
Huawei's founder, Ren Zhengfei, was once an officer in the People's Liberation Army. Huawei says it is now majority-owned by employees, Mr Ren's stake has fallen to around 2 per cent and it is neither controlled by the military nor the government.
But industry experts and government officials continue to question the nature of its ties with Beijing, criticizing the company for not being transparent enough to dispel such doubts.
In 2008, Huawei had to abandon a bid to acquire 3Com with US private equity group Bain Capital after it became clear that the Bush White House would veto the deal. Its sales in the country totalled $250m (£150m, €170m) in 2008 and are expected to have doubled last year after winning contracts from Clearwire, but it has yet to win larger numbers of customers.
Lenovo, the world's fourth-largest PC maker, also had difficulties conquering the US market. The company, majority controlled by a state-owned research institution, won Washington's approval to acquire IBM's PC business in 2005 after a lengthy security review.
Chinese companies are expected to face tougher scrutiny in the US following Google's announcement that its systems and those of 20 other companies had been attacked by hackers in China.
Huawei, China's largest telecommunications maker, among others has already faced roadblocks when seeking to invest in the US, win government contracts or sell products considered vulnerable to security leaks.
"This will increase the intensity of already substantial reviews of Chinese transactions in areas related to national infrastructure, which includes technology," said Jamie Gorelick, who served as deputy attorney-general during the Clinton administration and is now a partner at law firm Wilmer Hale.
China, meanwhile, has sought to soften its stance over the Google threat, with the Ministry of Commerce releasing a statement on Friday saying any decision by Google to withdraw from China would not affect Sino-US trade relations.
The Obama administration signalled its concern about Chinese investment in critical infrastructure when it made clear that it was prepared to reject a bid by a Chinese company to invest in a small Nevada gold mining operation because it was located near a naval air station.
The Google fracas might also spell trouble for Chinese companies already operating in the US.
"This is clearly a step back for a number of companies in this country on a very broad level," said an executive at a technology company who asked not to be named. "It might not mean that we will be losing orders, but this will make for a less conducive environment."
A source close to Huawei said: "My first gut reaction to the Google news was, this doesn't add any brownie points. This brings the issue about trust to the fore again."
Huawei's rapid growth in emerging markets and Europe has helped it squeeze aside global rivals and become the second-largest telecom equipment maker after Ericsson.
However, it has struggled to make inroads in the US because many corporate and government officials fear that telecom infrastructure made by the Chinese company could compromise their systems' security.
Huawei's founder, Ren Zhengfei, was once an officer in the People's Liberation Army. Huawei says it is now majority-owned by employees, Mr Ren's stake has fallen to around 2 per cent and it is neither controlled by the military nor the government.
But industry experts and government officials continue to question the nature of its ties with Beijing, criticizing the company for not being transparent enough to dispel such doubts.
In 2008, Huawei had to abandon a bid to acquire 3Com with US private equity group Bain Capital after it became clear that the Bush White House would veto the deal. Its sales in the country totalled $250m (£150m, €170m) in 2008 and are expected to have doubled last year after winning contracts from Clearwire, but it has yet to win larger numbers of customers.
Lenovo, the world's fourth-largest PC maker, also had difficulties conquering the US market. The company, majority controlled by a state-owned research institution, won Washington's approval to acquire IBM's PC business in 2005 after a lengthy security review.