Chinese investments in U.S. hotel companies spur national security scrutiny

Source: by Michael Hiltzik, LA Times

March 18, 2016, 8:11 PM

The surge in Chinese investments in U.S. hotel companies is starting to raise a question rarely heard in the world of commercial real estate: When does the ownership of a luxury hotel become a matter of national security?

Normally it's not, which may be one reason that so much Chinese capital has been flooding into the U.S. real estate market, especially in California. Chinese bids for U.S. manufacturing, financial and technology companies have been on the rise, spurring more government national security reviews. Until recently, real estate deals haven't raised the same political or security concerns. But that may be changing.

Although the U.S. has been the No. 1 target of Chinese investment capital in recent years, Chinese investment in the U.S. still pales in relation with that from other sources. China ranked only 14th in 2013, well behind such traditional leaders as Britain, Japan and Canada. Yet in recent years, Chinese deals have led the list of those scrutinized by the little-known Committee on Foreign Investment in the United States, or CFIUS, an interagency panel headed by the Treasury Department that screens foreign acquisitions of U.S. businesses for national security implications.

In 2012-14, according to the committee's most recent annual report, 68 of the 358 transactions reviewed involved Chinese investors. In second place were 45 British deals — a smaller proportion of a much larger deal flow.

The committee can't veto a deal on its own. But it can ask for modifications or, in extreme cases, refer a deal to the White House for a final ruling. China has had a discouraging record in such presidential reviews: President Obama blocked the purchase by Chinese-owned Ralls Corp. of several Oregon wind farm sites in 2012 on the grounds that some sites were located too close to a Naval weapons station. It was the first such veto since President George H.W. Bush ordered a Chinese government agency's acquisition of Mamco, a Seattle aerospace firm, rescinded in 1990. Committee intervention can shut down deals even without White House intervention; in January, Philips blamed the review committee for the death of a deal to sell its lighting business, Lumileds, to a Chinese company.



Read more: http://www.latimes.com/business/hiltzik/la-fi-hiltzik-20160317-column.html