On Saturday, the Washington Post’s Ariana Eunjung Cha reported on efforts by Shenzhen-based Huawei to acquire 3Com, a leading US manufacturer of telecommunications equipment. The story, entitled, “Telecom Firm in China Sets Sights on US market,” describes US opposition to the deal, and specifically points to concern among US government and industry officials about Huawei’s reported connections to the Chinese government and military. What follows is this:
Xing Houyuan, dean of the Beijing-based Overseas Investment Research Center, which is under China’s Ministry of Commerce, said efforts to block the deal amount to discrimination, an attempt by the United States to protect key industries like telecommunications.
“The so-called national security protections are only aimed at nationally owned or nationally controlled companies of certain countries like China,” Xing said.
Xing is likely referring to CNOOC’s [China National Offshore Oil Company] failed 2005 attempt to acquire Unocal, the 8th largest US oil company. Then, as now, US industry and business leaders voiced opposition to the sale of a company in a key US industry to a Chinese state-owned company. And then, as now, the Chinese claimed discrimination. Fair enough. But, in defense of discriminatory US trade practices, I merely point out that – when it comes to protecting key industries – the Chinese don’t even bother to discriminate. They just restrict everybody. So, in response to Mr. Xing Houyuan of the Overseas Investment Research Center, I offer a headline and article from the December 19, 2006 edition of the government-owned China Daily:
The article is lengthy – and available online – so let’s get to the point:
What are the key sectors critical to national security and the economic lifeline of China? The answer, given yesterday, is: armaments, power generation and distribution, oil and petrochemicals, telecommunications, coal, aviation and shipping industries were the State must have “absolute control,” according to a senior official … Li [Rongrong, Chairman of the State Assets Supervision and Administration Commission] said that the State should solely own, or have a majority share in, enterprises engaged in power generation and distribution, oil, petrochemicals and natural gas, telecommunications and armaments. [bolding, mine]
What I’ll never understand is why US and EU officials spend their time complaining about the national security consequences of Chinese acquisitions when they could simply point out that China will never allow a foreign entity – from any country – to acquire similar assets in China. Or, better put, what are the chances that Beijing would allow Cisco, another leading US networking company, to purchase a controlling stake in Huawei?