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The fast growing Chinese telecom company, Huawei, and Bain Capital tried to buy 3Com. The bid has now failed.
Huawei grew fast because of substantial Chinese government support:
With the benefit of an expanding Chinese telecom sector driving
basic revenue growth and substantial economic support from China's
government, Huawei has been able to broaden its product line and
address emerging market opportunities throughout the globe with such
speed an power that the global telecom supplier market has been able to
do littlemore than watch in stunned silence.
This was not capitalism at work, but foreign government strategic policy.
The
Coalition for a Prosperous America sent a letter to the appropriate
U.S. regulator, the Committee on Foreign Investment in the United
States (CFIUS), opposing the deal on national security grounds.
(The full text of the letter is below the fold... hit "read more").
The
CFIUS did not approve the deal. This is good news. Not
enough overall, in light of all the massive technology transfer and
foreign government procurement of U.S. assets. But good news.
August 30, 2007
Ms. Gay Hartwell Sills, Staff Chair
Committee on Foreign Investment in the United States
Office of International Investment
Department of Treasury
1500 Pennsylvania Avenue, N.W., Room 4201 NY
Washington, DC 20220
Via email (
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
) and fax (202.622.0391)
Re: Potential acquisition of Seagate Technology by Chinese company
Dear Ms. Sills:
We write to express our concern about the potential of a Chinese
company acquiring Seagate Technology. This acquisition, if it
occurs, would harm national security. The Chinese are the most
aggressive acquirers of sensitive U.S. technology by both illegal and
questionable means. Any Chinese company purchasing Seagate is
highly likely to be owned or controlled by the Chinese government.
The Coalition for a Prosperous America (CPA) is a coalition of
agriculture and manufacturing groups working for better trade
policies. We work for true free trade that is balanced, preserves
national sovereignty, and protects America’s geopolitical
strength. Our members include individuals, businesses and
associations that touch 40,000 people directly in many states.
Seagate was incorporated in 2000 in the Cayman Islands, and now has a
$13.6 billion market capitalization. As of June 30, 2006, the Company
had approximately 3,768 U.S. patents and 652 patents issued in various
foreign jurisdictions. Most recently, it has unveiled hardware
encryption technology. Seagate maintains sales offices throughout
the United States and in Australia, China, England, France, Germany,
India, Ireland, Japan, Singapore and Taiwan.
“Sovereign Wealth Funds,” funds owned or controlled by foreign
governments, and state owned enterprises are not normal “free market”
investments. They are government foreign policy tools. A
large portion of China’s economy is owned or controlled by the
government, and the Seagate acquisition deliberation is likely to
involve a state owned or controlled enterprise. This is not
Daimler-Benz buying Chrysler. The standards are different, and
our national interests are much more important.
The Chinese are the most aggressive perpetrators of military and
industrial espionage in the world. FBI Director Robert S. Mueller
III recognized them as being among the top threats to the U.S. in terms
of technological espionage. On July 26, 2007, Director Mueller
told the Senate Judiciary Committee. “There is substantial concern
China is stealing our secrets in an effort to leap ahead in terms of
its military technology, but also the economic capability of
China.”
Michelle Van Cleave, a former national counterintelligence executive,
told the Judiciary Committee that same day that Chinese spies are among
“the world's most effective” and include civilian and military spies
who have “a global reach.”
China is the biggest violator of intellectual property rights in the
world. The Chinese government conditions U.S. investment in their
country upon granting rights to technology the Chinese has not
developed. We do not have the details of these deals, but believe
they include Intel, Microsoft, and hundreds of other major companies.
The Chinese military is the only one clearly able to challenge U.S.
military superiority in the near term. Indeed, a recent Pentagon
report revealed the Chinese are spending substantially more on military
upgrading than had previously been thought. That report, entitled
“Military Power of the People's Republic of China: A Report to Congress
Pursuant to the National Defense Authorization Act Fiscal Year 2000”,
was released May 23, 2007 and said this:
In the early 1990s, former paramount leader Deng Xiaoping (d. 1997)
gave guidance to China’s foreign and security policy apparatus that,
collectively, has come to be known as the “24 character” strategy:
“observe calmly; secure our position; cope with affairs calmly; hide
our capacities and bide our time;be good at maintaining a low profile;
and never claim leadership.”
The report also noted:
[China] “has the greatest potential to compete militarily with the
United States and field disruptive military technologies that could
over time offset traditional U.S. military advantages.”
The Chinese government, and its subsidiary companies, are America’s
biggest creditor holding approximately $900,000,000,000 ($900 billion)
in U.S. bonds. America’s status as a major debtor to a potential
military and political adversary is unprecedented. This debtor
situation arises from the biggest trade deficits in the history of
humankind. Indeed, China officials floated the idea of using the
so-called “nuclear option” strategically against the U.S. dollar, and
thus the U.S. economy, on August 9, 2007. We do know China has
used these massive dollar holdings to buy strategic U.S. assets (such
as Blackstone Group) and strategic ports across the world.
Indeed, the Chinese government was reported today to have established
and funded an investment company to continue this world and U.S. asset
buying strategy.
The Chinese also acquire sensitive technology from our major
universities. We have reprinted and attached a letter from Dr. C.
William Kauffman, a professor in the University of Michigan’s
Department of Aerospace Engineering. Dr. Kauffman has witnessed
the transfer of sensitive technology to the Chinese at the University
of Michigan, spoken out about it, and has been punished. His
accusations are serious, very serious. He is a
whistleblower. Certainly we realize his facts will invite all the
traditional attempts to discredit him as a “disaffected
employee.” We have found his claims credible, and worth passing
on to you.
Trade is good when conducted properly. But too often trade is
being allowed to trump crucial American interests, including national
security, even as we tolerate massive trade distorting practices by
others. We ask that you vigorously review the potential for
Seagate to be acquired by the Chinese, and also review the rules
governing U.S. companies’ investment in China (relating to forced
technology transfer issues). No investment – going in either
direction - should occur without strong, clear, self-enforcing
guarantees and remedies preventing sensitive technology transfer or
compromising other strategic interests. Some investments, like
Seagate, are so laden with sensitive technology risks that they
probably cannot be completed under terms that eliminate these risks.
Respectfully,
Thomas F. Stokes
President
Cc: Robert M. Gates, Secretary of Defense (via U.S. mail)
Carlos M. Gutierrez, Secretary of Commerce (fax: 202-482-2741)
Henry M. Paulson, Secretary of the Treasury (fax: 202-622-6415)
Michael Chertoff, Secretary of Homeland Security (fax: 202-282-8401)
The Honorable Bennie Thompson, Chairman, Committee on Homeland Security (fax: 202-226-4499)
The Honorable Ike Skelton, Chairman, House Committee on Armed Services (fax: 202-225-9077)
The Honorable Duncan Hunter, Ranking Member, House Committee on Armed Services (fax: 202-225-0850
The Honorable Joe Lieberman, Chairman, Senate Committee on Homeland Security & Governmental Affairs (fax: 202-228-3792)
The Honorable Carl Levin, Chairman, Senate Committee on Armed Services (fax: 202-228-0036)
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