Merger reviews: China's new effort to access foreign tech; US bill to strip China's "developing country" status passes House 415-0 & Macron fails to budge Xi on Russia -- China Boss News 4.10.23
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Merger reviews: China's new effort to access foreign tech
Beijing is using anti-trust reviews as a new weapon in its tech war with the United States, according to Lingling Wei and Asa Fitch at the Wall Street Journal. Up close, however, China’s “hold-back” on the approvals looks more like a “hold-up” for access to strategically sensitive technologies recently banned for export by the U.S.
Wei and Fitch, WSJ:
As preconditions for approving some of the transactions, the people said, officials at the State Administration for Market Regulation, China’s antitrust regulator known as SAMR, have asked companies to make available in China products they sell in other countries—an attempt to counter the U.S.’s increased export controls targeting China.
And that puts American firms like Intel, who’s in the process of a $5.2 billion takeover of Israel-based Tower Semiconductor Ltd., and chip maker MaxLinear, who wants to purchase Taiwan’s Silicon Motion Technology for $3.8 billion, in a gnarly bind. Subject to Chinese anti-trust law to operate and sell locally, they must also comply with US legislation that has recently curbed the sale and production of dual-use technologies, like semiconductors, that have both civil and military applications.
WSJ:
Beijing in recent years has increasingly leveraged its merger-review process and antimonopoly rules to advance its political and economic goals, say multinational executives and their trade associations. While Chinese regulators rarely reject transactions outright, they have resorted to delaying and withholding approvals until their demands—often focused on benefiting Chinese companies at the expense of their foreign competitors—are met.
Although the use of law as a weapon wielded by China’s ruling elite has been practiced since the party-state’s beginnings in the early 20th century, according to Oxford legal scholar Orde F. Kittrie, Beijing has more recently "explictly adopted the use of lawfare as a major component of its strategic doctrine."
In a 2021 Cornell Law Review article, Jill I. Goldenziel said that “China is now the world’s leading practitioner of lawfare,” and that even “[t]he Chinese military prioritizes lawfare as one of the ‘Three Warfares’ that shape its military’s influence operations.’”
Goldenziel went on to state that “[n]o state in the world currently has a lawfare strategy as sophisticated as China’s, and that, although in the past the US and China have fought their “legal battles in multiple arenas: in the waters of the South China Sea, through a U.S. ally in international arbitration, through legislation,” a new battlefield has emerged in U.S. courts as they conduct a proxy war via industry.
For their part, Wei and Fitch think China's selective use of merger reviews make it all the more likely that other motives are at play.
WSJ:
Since the late 2000s, Beijing has gradually put in place an antimonopoly regime, including merger reviews. The effort had the encouragement of the U.S., which viewed it as a way for China to bolster market competition between private-sector and state-owned companies and for both Chinese and U.S. regulators to improve cooperation on competition-law enforcement.
However, while mergers involving big state-owned enterprises remain largely exempt from regulatory reviews, China has kept refining the system to give it greater flexibility to review foreign-related deals. Chinese companies as well as some 10 government agencies overseeing economic planning, information technology and other sectors are allowed to weigh in on the review process.
“Now it can be used as a weapon against foreign firms,” said Lester Ross, a Beijing-based lawyer at WilmerHale, who advisers American companies in China.
Amy Celico, a principal at Albright Stonebridge Group, told WSJ that the use of anti-trust reviews to gain access to tech shows desperation. “It’s harder today for global mergers and acquisition to get Chinese approval as Beijing has fewer levers to pull to pressure foreign companies,” she said.
For the rest of the Wei and Fitch’s WSJ analysis, WSJ News Exclusive | China’s New Tech Weapon: Dragging Its Feet on Global Merger Approvals, click here. For Goldenziel’s 2021 Cornell law review article, Law as a Battlefield, click here.
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US bill to strip China's "developing country" status passes House 415-0
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