A Study On The National Security Review System Of American Foreign Investment

In the 21 st century, China enjoys a high-speed development in oversea investment while increasing its attraction of foreign investment and maintaining a high-speed economic development. In 2015 the total sum of China’s oversea direct investment reached up to US$ 1180.2 billion, 14.7 percent increase over the previous year, which helped China to become the world’s third largest capital exporting country after the United States and Japan. In the future, China’s oversea investment is expected to continue its high speed growth. In fact, China’s long-lasting oversea investment rising is not only the result of China’s sustained and rapid economic growth, but also the inevitable requirement of China’s economic development in the future. By the mean of oversea investment, China can effectively make use of and regulate global resources. This has become a channel for China to improve its sustainable economic development to a higher level.The United States, now the world’s largest economy, is also the world’s largest market. In America energy costs are relatively low. There are many well-educated workers, world-class advanced technology and management experience. So, it is inevitable for China’s enterprises to invest in the United States to seek the core technology needed for China’s domestic industrial restructuring, to obtain advanced management experience and to acquire US strategic resources such as energy,intellectual property and famous brands. At the same time, after financial crisis,America’s industrial structure is upgrading towards service industry of the high-level,and the capital is starting to flow out of tradational manufacturing industry. This definitely calls for inflow of foreign capital and that is a good chance for the Chinese enterprises to invest in the United State. Chinese enterprises, for example through mergers and acquisitions, can maximize their profits at a lower economic cost.According to the latest statistics published by a US consultancy, Rhodium Group(RHG), the total sum of China’s direct investment in the United States in 2015 amounted to US$ 15.7 billion, an increase of 30 percent compared with that of 2014.Chin’s direct investment in the United States has risen from few hundreds of millions of US dollars annually in 2000 to US$ 15.7 billion in 2015. The growth rate of China’s direct investment in the United States is astonishing.In recent years, the United State, on the excuse of national security review,continues to obstruct and interfere with Chinese enterprises’ investment in the United States. The Chinese investors suffer more and more cases of US national security review when they invest in the United States. The number of notice of national security review has been raised from only one in 2005 accounting for 1.56 percent of the total amount of that year to 24 in 2014 accounting for 16.32 percent of the total amount of that year. So the national security review on foreign investment in the United States has become a fearful obstacle and resistance for China’s enterprises,especially the state-owned enterprises, the high-tech companies and the energy companies when they plan to invest in the United States. On one hand the Chinese enterprises need to invest in the United States, on the other hand the Chinese investors have to face the national security review of the United States. Therefore the problem of national security review has to be solved. Only by having an in-depth study of the US national security review on foreign investment can we better understand and cope with the national security review of the United States.This paper is composed of six chapters. The first chapter describes the theories related to national security in a macro manner introducing the concept of national security, the fields related to national security, the concept and classification of international investment, the impact of international investment on the economy of both capital importing country and capital exporting country, foreign investment admittance as well. And it also analyzes the domestic and international laws on which the national security review of foreign investment is based. So this part is the basic theory for further study US national security review of foreign investment.The second chapter discusses the developmental history of US national security review of foreign investment and the legal system of US national security review of foreign investment. The formation of the US national security review of foreign investment has its specific historical background and reasons. In fact, the US national security review of foreign investment has experienced from simple to complex, at last formed a complete set of domestic legal system.The third chapter discusses the institutions of the US national security review of foreign investment and the covered transaction. It analyzes in detail the role taken by the Committee on Foreign Investment in the United State(CFIUS), the US President and the US Congress. It also analyzes the functions they perform and the three key elements of judging a covered transaction.The fourth chapter discusses the practical procedures of the national securityreview of foreign investment in the United States. The US national security review of foreign investment has a complete set of operating procedure including the starting procedure, the review and investigation procedure and the oversight procedure. By analyzing the operating procedure of the US national security review of foreign investment, we can have a comprehensive understanding of the practical operations and the application of the US national security review in practice.The fifth chapter analyzes the current situation of national security review of the Chinese investor in the United States. Then this chapter analyzes two typical cases represented by CNOOC’s acquisition of Unocal and Shuanghui International’s acquisition of Smithfield. The analysis is concerning on the details of the Chinese enterprises’ response, performance, reasons of failure or success.The sixth chapter is providing some proposals of dealing with the US national security review of foreign investment for the Chinese companies who want to invest in the United States. This chapter proposes some practical resolutions to minimize the risks of US national security review and to enhance the success rate of Chinese investor when they acquire American business in the United States.Through the above-mentioned study, this paper concludes that the US national security review as a whole has a relatively complete legal system. Although the US national security review of foreign investment is to some extent unreasonable, the foreign investors who come to the United States have to obey it. In its actual operation, there are still some rules to be found. Hence the US national security review of foreign investment is not an insurmountable divide for the Chinese enterprises forward to invest in the United States. As long as to treat it seriously, to make a well-prepared and meticulous plan, the Chinese companies still have the opportunity to pass the US national security review of foreign investment and to invest successfully in the United States.