Chinese media calls U.S. blocking its acquisitions of global tech firms as a “red flag”

Chinese state-backed tabloid the Global Times called U.S. efforts to block cross-border acquisitions of tech companies a “red flag” that impedes China’s tech sector and disrupts the growth of the global tech sector.

The outlet, which is published by the People’s Daily, China’s official newspaper for the ruling Communist Party, argued a recent attempt to block a Chinese purchase of a Korean chip company “represents a dangerous precedent for the industry as a whole.”

“If the US succeeds in blocking the deal this time, it could set a very bad precedent for global high-tech mergers and acquisitions, further consolidating the industrial concentration in the US,” the report said further denting the relations between the two nations.

In March, China-based private equity group Wise Road Capital announced it would purchase Korea’s Magnachip Semiconductor Corp for $1.4 billion.

On Monday, Magnachip said in an SEC filing that the U.S. Department of Treasury, in a letter to the company’s legal counsel last Friday, said the acquisition posed “risks to the national security of the United States.”

The chip sector has become a hotbed for tensions between the U.S. and China. Both countries are investing billions of dollars into their domestic industries, with the recognition that semiconductors are critical to national security and economic development.

Cross-border acquisitions, which require approval from regulatory bodies, have at times fallen apart because of government objections.

In 2018, Qualcomm Inc’s planned $44 billion acquisition of Dutch chipmaker NXP Semiconductors NV failed after China’s anti-monopoly regulator signaled it would not approve the deal.

That same year, Singapore’s Broadcom Inc withdrew its $117 billion bid to acquire Qualcomm after Washington’s Committee on Foreign Investment in the United States (CFIUS) said the purchase could endanger the U.S’ national security by aiding China.

Experts have argued for long that there are two perspectives on the relationship between states and multinational corporations (MNCs).

One, the “state in command” perspective, sees states as dominant, with globalization only worsening the situation. The other—the “MNCs in command” view—sees MNCs as all- Powerful as a result of their assets.

Globalization from that perspective is not necessarily bad and may actually empower states against multinational firms. China’s dealings with MNC’s in the U.S.  from the early 1990s to the present show that neither perspective is accurate.

What is presently needed is a modified bargaining power perspective that focuses on the balance of needs, alliances, and the institutional environment as important factors shaping the bargaining dynamic between China and multinational enterprises.