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China Watch: Chinese Business Investment in the US Comes Under Scrutiny


Apple and Twitter also make the news.

MINYANVILLE ORIGINAL Can Chinese investment in the US be a good thing? This question was especially pertinent on the heels of Obama's decision to block Ralls Corp's planned purchase of an Oregon wind farm. A New York consulting firm, Rhodium Group, found that Chinese-owned firms have created 27,000 jobs in the US since 2000, which (though a small figure compared to the 700,000 Rhodium estimates Japanese firms have created here) represents potential for growth.

The study points out that Chinese investment in the US has been speeding up in recent years, with some 100 deals worth about $5 billion having been made in the past two years. In 2012, high-profile acquisitions include Sinopec's (NYSE:SNP) purchase of Devon Energy (NYSE:DVN) and Dalian Wanda's purchase of AMC Entertainment.

"There are fears that investment from China could not have the same positive impact on jobs as foreign direct investment from other countries because (Chinese) state ownership and China's industrial policy might lead its firms to acquire assets overseas only to move jobs and production back home," Rhodium analyst Thilo Hanemann told the Wall Street Journal. "Our data shows that FDI from China is positive for employment."

Here's the rest of this week's business news:
Obama Blocks China Investment: As mentioned, Chinese-owned company Ralls Corp is suing President Obama after he blocked Ralls from acquiring a small Oregon wind farm on grounds that it was a national security risk. Obama's controversial move was the first time in 22 years that a president has invoke national security concerns as a reason to block foreign investment.

"By failing to provide Ralls with sufficient notice and opportunity to be heard prior to prohibiting its acquisition of the wind farms and imposing extraordinary restrictions on the use and enjoyment of its property interests, CFIUS and the president have unconstitutionally deprived Ralls of its property absent due process," the company alleged in the amended complaint, reported Bloomberg.

The Obama administration's reason for blocking the transaction was that the wind farm was too close in proximity to a US naval base, but many commentators have written that the move was unnecessary. Joel Backaler at Bloomberg argues, "Unlike Chinese companies that have attempted overseas transactions in more sensitive industries, such as Huawei and ZTE (SHE:000063) in the telecommunications industry and China National Offshore Oil Corporation (CNOOC) (NYSE:CEO) in the oil and gas industry, Sany's [parent company of Ralls] core business is industrial machinery and its investments are primarily guided by economic, not political interests."

Edward Alden, a senior fellow at the Council on Foreign Relations, also opined to CNN that the move "will unfortunately be seen as yet another signal – this time from the highest possible level - that the United States does not really want Chinese investment. And for an economy still struggling to create jobs, that's the wrong signal to send."

Apple (NASDAQ:AAPL): The good news for Apple: ISI Group analyst Brian Marshall estimates that if the company were able to strike a deal for China Mobile (NYSE:CHL) to carry its iPhone, sales of the device in China would double. Apple currently reaches only about a third of China's smartphone subscription base through partnerships with China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA), Marshall says.

The bad? An Apple-China Mobile deal doesn't not look likely to happen anytime soon, says Deutsche Bank. Analysts from the bank had a meeting with China Mobile's management recently and learned that the state-owned company is reluctant to carry the iPhone because of the "heavy subsidy burden," reports MarketWatch

"We believe that the stars are not aligned for a China Mobile licensing of the iPhone 5," said Deutsche Bank in a note. "The government is not supportive."

Twitter: Like Facebook (NASDAQ:FB), Twitter is banned in China. The assumption is that Chinese social media users turn to Sina (NYSE:SINA) Weibo for their microblogging needs, just like how they use Renren (NYSE:RENN) for social networking.

However, a new study by research firm GlobalWebIndex found that China actually has the most number of active users in the world, with 35.5 million users actively tweeting, followed by India at 33 million. The US is third at 22.9 million.

Because the sample size of the study was only about 8,000, the accuracy of the extrapolated results have been brought into question. Tech blog TheNextWeb contacted GlobalWebIndex for clarification and obtained this reply:
Our methodology is survey based. We surveyed a representative sample of more than 8k (total) respondents in China over 7 Waves of research from 2009. Our panels are provided by LightSpeed, the market standard for Online market research, and recognised as the most credible panel provider.

For this reason we are very confident in our data and we actually do not really find very surprising that in a country where Sina Weibo has more than 260m active users, 35m of them are using also Twitter. We tracked a constant rising of Twitter and Facebook users in China over the years, and obviously they are primarily used via mobile devices and through VPN services.

Huawei: The world's largest telecommunications equipment maker is considering an initial public offering in the US, reports the Wall Street Journal.

According to sources who spoke with the Journal, Huawei has reached out to investment banks to learn more about the IPO process, including where it would be suitable for them to offer stock, and what the disclosures necessary would be.

Because of rumors that Huawei has ties to the Chinese military [Its CEO, Ren Zhengfei, was a former member of the People's Liberation Army], the company has been unable to win contracts in countries such as the US and Australia on perceived security threats. Therefore, Huawei is of the belieft that an IPO would help make the company become more transparent and therefore be able to obtain more contacts in big markets like the US.

"We haven't ruled out the possibility of a listing. We've always been in touch with banks, but I don't think anything has been decided," a Huawei source, who declined to be named, told Reuters.

Twitter: @sterlingwong
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