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Obama blocks Chinese takeover of tech group Aixtron

US President Barack Obama has blocked a Chinese company’s purchase of German chip equipment manufacturer Aixtron on national security grounds in a move that highlights the growing hostility towards Chinese cross-border investment in western countries. 

In a presidential order issued on Friday, Mr Obama said “there is credible evidence” that Chinese investors Fujian Grand Chip “might take action that threatens to impair the national security of the United States”. He did not offer any further details. 

His move follow’s last month’s announcement by Aixtron that it had been informed by the Committee on Foreign Investments in the US that it had national security concerns about Fujian Grand Chip’s takeover of the German company and its US subsidiaries. The German government in October withdrew its approval for the deal amid concerns over the growing number of Chinese acquisitions of German companies.

Ahead of the decision, China’s foreign ministry had urged Mr Obama not to politicise the Aixtron transaction. 

“Since it’s a normal commercial activity, it will be carried out following the rule of markets and business,” a foreign ministry spokesman in Beijing told reporters on Friday. “We hope the external parties will not over-interpret that or make any political intervention.” 

Mr Obama’s decision also comes amid expectations that his successor, Donald Trump, may bring an even more hostile attitude towards Chinese investment in the US with both Democrats and Republicans in Congress calling for a broadening of Cfius’s mandate. 

The interdepartmental committee is now authorised only to examine national security issues linked to foreign acquisitions of US companies. But some in Congress want to see its mandate include an economic benefits test and to take an even broader view of the US national interest than it does now. 

This is not the first time Cfius has intervened to block a transaction involving a Chinese company. But it is rare for a decision to go all the way to the president with companies normally choosing to cancel deals once concerns by the committee become clear. 

Earlier this year, Philips, a Dutch technology group, terminated a $3.3bn deal to sell its US-based Lumileds lighting division to a Chinese-backed private equity fund because of opposition from the committee. 

Unisplendour, a subsidiary of state-owned Tsinghua Holdings, also withdrew its $3.8bn bid for a stake in Western Digital, a US data storage company, after it became clear early this year that Cfius would conduct a review. 

A study by the Rhodium Group last month found that Chinese investment into the US exceeded US investment into China for the first time in 2015. Overall, Rhodium estimated that Chinese companies have invested $64bn in the US, creating 90,000 jobs.

Via FT