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Congress should play a stronger role overseeing takeovers of U.S. companies by Chinese firms, according to the government commission charged with monitoring China’s growing global economic influence and military might. “The past year saw Chinese firms bid to take control of three major U.S. companies,” said the U.S.-China Economic and Security Review Commission in its annual report to Congress, unveiled Thursday, alluding to Lenovo Group Ltd.’s acquisition of IBM Corp.’s personal computer operations and unsuccessful bids by Chinese companies to buy Maytag Corp. and Unocal Corp. “These U.S. corporate acquisition efforts by Chinese firms signal what may be the beginning of a steady stream of Chinese purchases of U.S. corporate assets.” Noting that the Chinese government has amassed $769 billion in foreign reserves that state-sponsored companies can spend on acquisitions in the U.S., the USCC recommended four major changes to policies for federal review of takeovers of U.S. companies by foreign firms. Specifically, the proposed changes focus on revamping the Committee on Foreign Investments in the United States, a 12-member panel charged with examining national security issues raised by cross-border deals. The USCC recommended that Congress require CFIUS to notify lawmakers each time it reviews a proposed transaction and report on how it disposes of cases. Another major recommendation calls on CFIUS to expand its purview beyond national security to include economic considerations. Demands for such a change reached a peak this summer when Beijing-based CNOOC Ltd. made a bid to buy Unocal, an El Segundo, Calif.-based energy company. The USCC also wants the Department of the Treasury, which chairs CFIUS, to cede its leadership to a representative of another government agency that sits on the commission, such as the departments of Homeland Security, Defense or Commerce. Treasury Deputy Secretary Robert Kimmitt, who currently chairs CFIUS, has previously expressed opposition to any plan to grant lawmakers more influence over the commission. “Just as I don’t think the Department of Justice would like Congress involved in antitrust reviews, I don’t think Congress should participate in this approval process,” he said during a Senate hearing last month. A Treasury spokesperson said Kimmitt remains opposed to any legislative changes to CFIUS. The CFIUS recommendations are uncertain to be adopted, with even two of the USCC’s own members expressing objection to the plan. “The recommendations relating to CFIUS would inject Congress into a process that has been functioning effectively and cast doubt on the United States’ long-standing open investment policy,” said commissioner William Reinsch. Engaging Congress in CFIUS reviews “will so confound the process that foreign investment in the United States will be chilled, added USCC member Stephen Bryen. The USCC’s proposal also threatens to complicate efforts by Sen. Richard Shelby, chairman of the Senate Banking Committee, to give Congress more say over foreign acquisitions. The Alabama Republican in October floated a toned-down alternative to legislation introduced this summer by Sen. James Inhofe, R-Okla., that mirrors the commission’s latest suggestions. Shelby favors allowing Congress to order CFIUS to investigate specific mergers, while maintaining the Treasury Department’s leadership of the group. “I am confident that the requisite fixes will be relatively painless,” Shelby said at a hearing on the issue last month. “The [Senate] Banking Committee … will take no actions that impede international investment.” A Shelby spokesperson said Wednesday that the senator has not yet reviewed the commission’s latest recommendations. Congress established the USCC in 2000 to help normalize trade relations with China and to encourage its membership in the World Trade Organization. The USCC’s report also makes separate recommendations for responding to China’s military power, proposing ways to address its monetary policy, which critics say confers an unfair trade advantage, and arguing in favor of penalizing Chinese firms engaged in proliferation of weapons of mass destruction. The report also supports raising pressure on Beijing to enforce human rights and crack down on piracy of intellectual property. Copyright �2005 TDD, LLC. All rights reserved.

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