In a letter obtained by Variety, posted below, Schumer, who is the Senate minority leader, says he fears that Wanda’s deal-making is orchestrated by the Chinese government.
“I am concerned that these acquisitions reflect the strategic goals of China’s government,” he wrote. The letter was addressed Treasury Secretary Jack Lew, U.S. Trade representative Michael Froman and U.S. President-elect Donald Trump.
Schumer’s cry may find an echo with Trump. In his campaign, Trump frequently made assertions about China’s actions and the motives behind them and called for action against Chinese acquisition in the States.
“While China’s government has aggressively pursued policies that encourage strategic acquisition in the U.S., U.S. companies continue to face steep barriers to market access in China,” the letter said.
Wanda has been the Chinese company that has gone furthest in buying its way into Hollywood. It acquired the AMC cinema chain in 2012, Legendary Entertainment early this year and in recent months has agreed the $1 billion purchase of Dick Clark Productions and (through AMC) a deal to buy the Carmike theater chain.
Trump also railed against supposed manipulation of China’s currency. Now at some RMB6.95 to the U.S. dollar, the Chinese Yuan is close to its lowest rate against the greenback in some eight years.
Here’s the full text of Schumer’s letter:
Dear Secretary Lew and Ambassador Froman:
I write regarding the growing number of acquisitions of U.S. companies by state-directed acquirers in China. The recent acquisitions of U.S. film companies by the Dalian Wanda Group have been prominent examples of this growing trend. I am concerned that these acquisitions reflect the strategic goals of China’s government and may not be receiving sufficient review by the Committee on Foreign Investment in the United States (CFIUS). While China’s government has aggressively pursued policies that encourage strategic acquisition in the U.S., U.S. companies continue to face steep barriers to market access in China. I urge CFIUS to consider the developing landscape of foreign government-driven investment in its reviews of foreign acquisitions. Additionally, I urge the Administration to more aggressively use all available enforcement mechanisms if China makes little progress in removing protectionist barriers to U.S. market access.
Fortune Magazine’s 2016 list of the 500 largest companies in the world includes 103 from China, which is just 31 fewer than the United States. Many of these companies are supported by their government and have become a growing force in international markets. A growing number of large Chinese companies are acquiring U.S. companies in the information communication technology, transportation, media, manufacturing and agriculture sectors. In the first two quarters of this year, Chinese acquisitions in the U.S. reached a record high of 55 completed acquisitions worth more than $17 billion. Media reports indicate that high ranking officials in China’s government and China’s sovereign wealth funds are financially backing many of these acquisitions. Chinese acquirers are often “state champions,” which are state-owned enterprises or large companies that benefit from government subsidies intended for global expansion.
As China’s government directs investment in open U.S. markets, it has developed protectionist regulatory and legal regimes that bolster its “state champions” and undermine U.S. competition in China. U.S. companies that wish to invest in certain sectors in China are only allowed to invest through a “pay to play” system where they are forced to either form a joint-venture, often involving intellectual property sharing, with a Chinese company or allow a Chinese company to gain stakes in their U.S. assets.
The most recent example of this trend has been in the film industry. Despite a WTO ruling against China’s restrictive policies, U.S. filmmakers can still only distribute a small capped number of censored movies in China every year. To get around this cap and enter China’s growing film market, U.S. film companies have recently cut deals with China’s largest film company, the Dalian Wanda Group, which is a Fortune 500 company, a former state-owned enterprise and has deep connections to China’s government, according to a New York Times investigation. This is concerning on a number of levels, but primarily demonstrates the un-level playing field that U.S. companies continue to face in many sectors of China’s economy.
In 1992, Congress expanded CFIUS by requiring the Committee to investigate mergers, acquisitions and takeovers when the acquirer is “controlled by or acting on behalf of a foreign government” and the acquisition could affect the national security of the United States. You can be certain that the new Congress in 2017 will work on legislation to further expand CFIUS oversight authority to reflect today’s challenges and look at other ways we can enforce reciprocity with China. In the interim, I encourage CFIUS to fully examine the beneficial ownership of foreign acquirers to ensure that investments being made on behalf of a foreign government receive the proper review. Additionally, the Administration should continue attempts to strike market-access concessions through U.S-China Bilateral Investment Treaty negotiations and other forums; and if China’s protectionism continues, we must aggressively utilize all available enforcement mechanisms.
The U.S. is the largest recipient of foreign investment in the world and must remain open to market-driven foreign investment. In the same vein, we must guarantee that our companies have the opportunity to harness growth in international markets and expand to create more good paying jobs. U.S. companies should be able to compete with Chinese companies on a level playing field at home and abroad.
Thank you for your attention to this issue. I look forward to your response.