Lattice ruling would hinder China, US efforts to achieve their economic goals

By Wang Jiamei Source:Global Times Published: 2017/9/4 22:33:39

Whether US President Donald Trump will follow the recommendation of a federal panel regarding the sale of an American technology company will give a clue as to how tough the US regulatory environment will be for Chinese investment in its chip sector.

The Committee on Foreign Investment in the United States (CFIUS) ruled on Friday against the proposed acquisition of Lattice Semiconductor Corp by Chinese-backed private equity firm Canyon Bridge Capital Partners, citing national security concerns. Now the deal hinges on Trump, who has 15 days from the CFIUS ruling to make a final decision.

It is generally believed that it's quite unlikely he will approve the deal, given the strained Sino-US trade relationship. If the deal is ultimately blocked, it will not bode well for Chinese companies' interest in US chipmakers, and it will cast a shadow on bilateral investment prospects.

To a certain extent, the fate of the deal will reveal whether the US government is overly defensive toward Chinese investment in the semiconductor or other high-technology sectors. A rejection may further intensify the tension surrounding Sino-US trade relations, which have been affected by the so-called Section 301 investigation. China could also take retaliatory measures against US businesses in the country.

Restricting access of Chinese companies to the US chip sector would also raise further uncertainty over Sino-US technology cooperation and have adverse effects on bilateral investment. In particular, the Sino-US bilateral investment treaty (BIT), which is an agreement for greater market access for bilateral foreign investment, is still in the process of being negotiated. As national security concerns are generally not exempt from trade or investment agreements, if the US government makes it clear that it will block any Chinese investment in American technology companies, even a low-technology chipmaker like Lattice, then it will be pointless for China to make big concessions in the BIT talks.

With the Chinese economy and industries making progress by leaps and bounds, it is understandable that investment from the country is moving up the value chain in foreign countries. While Chinese companies are looking for acquisitions that can improve their technological levels, the US is hoping to attract more foreign investment in its high value-added manufacturing sector.

Blocking the Lattice acquisition would only hamper both parties from achieving their goals.

The author is a reporter with the Global Times.


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