What’s the role of CFIUS in buying tiktok?

[Global Times reporter Lu Ming Qingmu, fan Lingzhi, Ding Yuqing] recently, the news that “about 60% of Microsoft employees oppose the acquisition of tiktok” has attracted much attention. Behind the deal, which even Microsoft employees regard as “immoral”, there is a “mysterious killer” of the US government department, namely, the Committee on foreign investment. On the issue of tiktok, the U.S. government first threatened to block and then forced to buy and sell. What role has CFIUS, which has been established for 45 years, played in it? Looking back over the past few years, there are both state-owned enterprises and private enterprises that have failed in investment due to CFIUS review. The trump administration has entrusted important responsibilities to CFIUS, and even some officials encouraged some allies to establish a system similar to CFIUS to review Chinese investment during their visits. Some European and American media bluntly said: “version 2.0 CFIUS is one of the tools of the United States for China.”. In the view of Chinese scholars, CFIUS is “the clerk who implements the intention of the White House”. The full name of the Committee on foreign investment in the United States is “the Committee on foreign investment in the United States”, which is headquartered in the Treasury building in Washington, D.C. “Global Times” reporter went to the Ministry of finance to interview, found that there is a security guard with guns at the entrance. CFIUS was established by executive order No. 11858 issued by President Ford in 1975 according to section 721 of defense production act of 1950. In the 1970s, some oil producing countries used a lot of money to buy American assets, which caused American concern. Since its establishment 45 years ago, CFIUS has developed into an inter ministerial organization involving more than ten U.S. government departments. Its members are composed of the heads of the departments of finance, justice, homeland security, commerce, defense, the State Department, the Department of energy, the U.S. trade representative office, and the office of science and technology policy. < p > < p > “enigmatic”, “one of the most opaque institutions in the United States” and “secret weapons outside the intelligence and military agencies of the United States”, these are the words commonly used in describing CFIUS four years ago by international public opinion. This is because CFIUS has very strict confidentiality provisions, and never publicly expresses its views on the review process of the enterprises involved in the case and related cases. According to the information provided by the U.S. Treasury Department, CFIUS will generally complete the review of most foreign investment cases within the initial 30 days. In some cases, CFIUS may initiate an investigation into a transaction, but it must be completed within 45 days. < / P > < p > “when many people criticize us president trump for violating the threat of byte skipping, they ignore the role of CFIUS.” CFIUS has been reviewing the acquisition of the Chinese company in 2017 in recent years, the German “business daily” said on the 4th In the transaction of video applications, “according to its opaque principle, tiktok’s fate is obviously in the hands of CFIUS and trump.”. The German media is no stranger to CFIUS. In June last year, the Frankfurt report described CFIUS as “an unpredictable black box in the eyes of CFOs of some international companies” because of its “lack of transparency” and affected companies usually do not know why they are banned from trading by CFIUS. In November 2017, CFIUS refused China Kerui group’s acquisition of German plasma product manufacturer bioassay company for safety reasons, because the latter has branches in the United States. As a result, biotest had to sell its U.S. branch first and lost part of its profits. In January 2018, Chinese and German enterprises finally cleared the barriers, bypassed U.S. regulation and completed the acquisition. Some international media have been talking about CFIUS, some saying that CFIUS almost acts as a “transaction killer”, while others emphasize that CFIUS is a successful model for Chinese funded international acquisitions. “In today’s business policy environment, it’s becoming increasingly difficult to reach a pragmatic solution with CFIUS, considering the protection of national security interests on the one hand and ensuring the economic rationality of investors on the other,” said Michael ramrose, chief financial officer of biotest The Federation of German industries also warned German companies in December last year that the authority of CFIUS has been expanded. From 2014 to 2018, CFIUS reviewed 627 acquisitions, and “the president’s decision is binding and cannot be challenged legally.”. Trump has blocked two deals in 2017 and 2018: a US $117 billion bid by Chinese companies for us chipmakers lattice semiconductor and Broadcom. In recent years, China’s economic cooperation with other countries in the United States is limited by the large-scale investment of China’s economic institutions. CFIUS has relatively loose restrictions on investment from some European countries. He mentioned that the earliest case of investment restrictions on China was in 1990, when President Bush signed a presidential decree to prevent China aviation technology import and Export Corporation from purchasing MAMCO, a Seattle aircraft parts manufacturer, in accordance with the Cfius proposal. Mei Xinyu said that CFIUS’s judgment mainly depends on discussions among various departments within the U.S. government. In fact, there are no very definite legal provisions and the process is not transparent. < / P > < p > “everything is related to CFIUS, which is the” watchdog “of trump government’s China related transactions.” According to an article published on February 14 by the Bloomberg News Agency. The article said that for a long time, the message conveyed by the United States to overseas investors was “the opening of American business”, but the trump administration, which called out “the United States first”, has changed. The “mysterious” CFIUS has become one of the tools and “operates behind closed doors”. In the past few years, CFIUS has gained more and more power, which has frustrated some acquisitions of US companies by investors, especially Chinese investors. The chairman of CFIUS is the U.S. Secretary of the Treasury. Mnuchin, the current US Treasury Secretary, used to be the chief fundraiser of Trump’s campaign team. Since he became Treasury Secretary in 2017, he began to reform CFIUS. In August 2018, the foreign investment risk assessment Modernization Act promulgated by the U.S. government is regarded as the most significant amendment to CFIUS since its establishment in more than 40 years. The relevant act requires CFIUS to more strictly review foreign acquisitions of U.S. companies and provide national security assessment reports for foreign-invested U.S. enterprises. BBC said on the 14th that the driving force behind the bill is that the United States is worried that Chinese enterprises will acquire new technology from the United States through investment and M & A. According to the financial times, the United States “the introduction of the modernization of Foreign Investment Risk Assessment Act marks the end of an era:” national security, rather than economic interests, has become a key factor in influencing foreign investment in the United States. ” According to the article, CFIUS has been responsible for reviewing the impact of overseas investment on US national security since the 1970s, but it has always been inclined to “put economic interests above potential risks”. The new bill is the most significant amendment of CFIUS in 40 years, marking a change, and the US government has begun to reposition American enterprises. From November 10, 2018, the U.S. Treasury Department has implemented new regulations, requiring foreign investors to submit key technologies involving 27 industries of the United States to CFIUS for “national security assessment” when conducting investment transactions in the United States. These industries include semiconductors, telecommunications and defense. Violators will face fines up to the amount of the proposed transaction. < p > < p > according to an article published on the website of Fortune magazine in January this year, with the release of new regulations on Chinese enterprises’ investment in key fields of science and technology enterprises in the United States, the scope of CFIUS review has also expanded dramatically, and the ultimate result of these new regulations is to “end the dependence of American enterprises on Chinese investors”. According to the article, the new regulations are not limited to US defense and aerospace, but also include US technological advantages, key infrastructure and sensitive data. On July 15, Thomas Fedor, assistant secretary of the Treasury of the United States, delivered a keynote speech at a meeting on the development prospects of CFIUS. He said frankly: “as an assistant secretary in charge of investment security, my work focuses on CFIUS. The foreign investment risk assessment Modernization Act, enacted in 2018, cleverly establishes this position and can better lead CFIUS. The task of CFIUS is to support foreign investment in the United States on the premise of protecting national security. We have no ambiguity about this. Since the enactment of the act, CFIUS has cleaned up nearly $400 billion worth of transactions. ” < p > < p > Fei duo, who holds a doctorate in law, has worked for seven years in the office of foreign assets control under the Ministry of finance, which is mainly responsible for the implementation and enforcement of US economic sanctions. In his speech, he also mentioned his experience of serving in the U.S. Navy before his legal career, and talked about the fatal blow to the US Navy if some cutting-edge technologies and control systems fail. Feiduo then changed the subject, emphasizing the impact of foreign investment on the national defense industry, while “foreign investment is not always benign”. Some foreign investment, he said, was “ostensibly an industrial policy implemented by private companies”, but usually had a foreign government background and was implemented with the support of subsidies or other incentives. In terms of high cost, CFIUS is at a “historic turning point”. In the past two years, the number of employees has been expanded, and the workload has also increased. In addition to improving efficiency, CFIUS is also increasing vigilance. He finally mentioned that the technological advantages of the United States and its allies may be eroded, and some countries want to replace the United States, such as “China plans to become the global leader in the development of artificial intelligence by 2030”. Thus, “from a broader perspective, considering the new decade, the United States and its partners face accelerated technological change and highly complex national security challenges.”. According to the U.S. Enterprise Research Institute, due to the U.S. government’s enhanced scrutiny, China’s investment in the United States has dropped from $53 billion at its peak in 2016 to $3.2 billion in 2019. According to a new report released by CFIUS, the number of cases related to Chinese enterprises has dropped from 60 in 2017 and 55 in 2018 to 25 in 2019 as the relationship between the United States and China is deteriorating. Nevertheless, the total number of Chinese enterprise cases is 140, which still ranks the first in all countries, accounting for 1 / 5 of the total. Fedor also said that although China’s investment in the US has decreased significantly since its peak in 2016, CFIUS has received a large number of notifications and statements from Chinese purchasers. In Mei Xinyu’s view, it is difficult for some Chinese enterprises to get rid of the hat if they are put on the hat. It can be said that “every man is innocent, and he is guilty.”. Of course, there are many successful cases of dealing with CFIUS in China. For example, in 2013, Shuanghui company passed CFIUS audit and successfully acquired Smithfield company of the United States. But what impresses us is more cases of Chinese enterprises suffering setbacks. Huawei had planned to acquire the patented technology of 3leaf company in the United States, but CFIUS believed that this would “threaten the security of the United States”, which eventually led Huawei to withdraw the transaction in February 2011. At the beginning of January 2018, due to the delay in obtaining CFIUS license, the merger and acquisition of American financial technology company suhuijin and Alibaba’s ant financial services were officially terminated. In March 2019, CFIUS forced a Chinese company to sell Grindr, a US gay dating app, on the grounds of “threatening us national security”. American media analysis said that the United States rarely forced Chinese enterprises to sell completed acquisitions,

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