The costs of perceived hypocrisy: The impact of U.S. treatment of foreign acquisitions of domestic enterprises

Duke Law Journal

Volumn 57, Issue 6, 2008, Pages 1795-1832

  Deas, Destiny Duron ^a  

^a DUKE UNIVERSITY   (United States)

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EID: 50949131918     PISSN: 00127086     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (268)

1. Eugene Tang & Matthew Benjamin, China's Foreign-Takeover Rules May Hurt Growth, Invite Backlash, BLOOMBERG.COM, Dec. 18, 2006, http://www.bloomberg.com/apps/news?pid=20601109&sid= aqATQkgcuqBM&refer=exclusive (quoting the Sany Heavy Industry Company's executive vice president).
2. The Chinese M&A Rules apply equally to mergers and acquisitions. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (promulgated by the Ministry of Commerce of the People's Republic of China, Aug. 8, 2006, effective Sept. 8, 2006) (P.R.C). art. 2, available at http://english.mofcom.gov.cn/aarticle/policyrelease/domesticpolicy/ 200610/20061003434565.html (English translation by the Ministry of Commerce of the People's Republic of China). For simplicity, this Note uses the term "acquisitions" throughout.
3. Id. The Ministry of Commerce promulgated the regulations, and they became effective on September 8, 2006. Id.
4. Prior to the revised Chinese M&A Rules, China regulated foreign acquisitions of domestic companies with interim regulations. Waiguo touzi zhibing goujing nei qiye zhixing guiding [Interim Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors] (promulgated by the Ministry of Commerce, Mar. 7, 2003, effective Apr. 12, 2003) (P.R.C), available at http://www.chinadaily.com.cn/bizchina/2006-04/17/ content_569271.htm (English translation). Commentators have criticized these earlier rules.
5. See, e.g., Peter A. Neumann & Tony Zhang, China's New Foreign-Funded M&A Provisions: Greater Legal Protection or Legalized Protectionism?, 20 CHINA LAW & PRAC. 21, 21 (2006) (noting that the Interim Regulations "were issued somewhat hastily").
6. See INV. DIV., ORG. FOR ECON. CO-OPERATION AND DEV., RECENT DEVELOPMENTS IN CHINA'S POLICIES TOWARDS CROSS-BORDER MERGERS AND ACQUISITIONS (M&A) 3 (2006) [hereinafter OECD REPORT] ("The lack of definition of terms... appears to render the new screening requirement less than wholly transparent.");
7. see also Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 10 (vesting examination and approval authority in the Ministry of Commerce).
8. See Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12 (stating that the Ministry of Commerce has the power to review mergers and to stop those mergers not submitted to it for review).
9. In 2007, the United States had a trade deficit with China of over 256 billion U.S. dollars. U.S. Census Bureau, Foreign Trade Statistics, http://www.census.gov/foreign-trade/balance/c5700.html# (last visited Apr. 31, 2008).
10. See, e.g., Client Alert, Baker & McKenzie, China Amends Foreign M&A Regulations 1 (Sept. 2006), available at http://www.bakernet.com/NR/rdonlyres/CDDDA47C-B52E-40AC-9325-95DB28803733/40679/ ChinaAlertMASep061.pdf ("[T]hese new provisions have sparked concerns among foreign investors that future acquisitions will be subject to much tighter control and further scrutiny by the Chinese government.").
11. See OECD REPORT, supra note 5, at 3 (noting that the revised rules amount to an "ex post restriction which can substantially impede the stability of cross-border merger or acquisition transactions").
12. See infra Part I.B.
13. This Note also uses "acquisition" to mean both mergers and acquisitions under U.S. M&A Rules, because like the Chinese rules, see supra note 2, the U.S. rules apply to mergers and acquisitions equally, 50 U.S.C. app. § 2170(a) (2000) ("The President or the President's designee may make an investigation to determine the effects on national security of mergers, acquisitions, and takeovers proposed or pending on or after the date of enactment of this section.").
14. See Comm. on Foreign Inv. in the U.S. (CFIUS), U.S. Dep't of the Treasury, Section 721 of the Defense of Production Act of 1950, http://www.treas.gov/offices/international-affairs/exon-florio/ (last visited Apr. 31, 2008) ("The intent of Exon-Florio is not to discourage [foreign direct investment] generally, but to provide a mechanism to review and, if the President finds necessary, to restrict [foreign direct investment] that threatens the national security.").
15. Exec. Order No. 11,858, 3 C.F.R. 990 (1975), reprinted in 15 U.S.C. § 78(b) app. at 167-168 (2000).
16. CFIUS, supra note 12. The members of CFIUS are the Director of the Office of Science and Technology Policy, the Assistant to the President for National Security Affairs, the Assistant to the President for Economic Policy, Secretaries of Treasury (Chair), State, Defense, Homeland Security and Commerce, the Attorney General, the Director of the Office of Management and Budget, the U.S. Trade Representative, and the Chairman of the Council of Economic Advisers. Org. for Int'l Inv., Fact Sheet, http://www.ofii.org/factsheet.htm (last visited Apr. 31, 2008).
17. ALAN P. LARSON & DAVID M. MARCHICK, COUNCIL ON FOREIGN RELATIONS, COUNCIL SPECIAL REPORT No. 18, FOREIGN INVESTMENT AND NATIONAL SECURITY: GETTING THE BALANCE RIGHT 4 (2006).
18. Pub. L. No. 100-418, § 5021, 102 Stat. 1425 (1988) (codified at 50 U.S.C. app. § 2170 (2002)).
19. See 50 U.S.C. app. § 2170(a) (delegating broad power to the president to review covered transactions, which include those that "could result in foreign control of persons engaged in interstate commerce in the United States");
20. id. § 2170(f)(3) (listing "the control of domestic industries and commercial activity by foreign citizens" as a factor the President or President's designee may take into account);
21. Exec. Order No. 12,188, 3 C.F.R. 131 (1981), reprinted in 19 U.S.C. § 2171 app. at 480-82 (2000) (delegating responsibility under 50 U.S.C. app. § 2170 for trade negotiations, including those "concerning direct investment incentives and disincentives and bilateral investment issues concerning barriers to investment," to the United States Trade Representative).
22. LARSON & MARCHICK, supra note 15, at 4. Not every transaction with a foreign corporation requires CFIUS approval. Id. at 6. For example, "[i]n the last few years, CFIUS has reviewed between forty and sixty-five transactions out of the more than 1,000 foreign acquisitions of U.S. enterprises made annually." Id.
23. See 50 U.S.C. app. § 2170(a) ("[T]he President's designee may make an investigation...." (emphasis added)).
24. Id. § 2170(b).
25. Id. § 2170(d).
26. Id. § 2170(b)(3)(B). The Organization for International Development has summarized the process of the CFIUS review since the Exon-Florio Amendment: Filing a notice with CFIUS of a foreign acquisition is voluntary and typically done at the initiative of the parties. However, parties are motivated to file by the fact that the law empowers CFIUS and the President to dissolve the acquisition at any time in the future, even after an acquisition has been completed, if a filing was not made. After a transaction has been filed, CFIUS conducts an initial review, utilizing the full intelligence and national security infrastructure of the U.S. government, based on detailed information from the parties, which frequently receive questions and requests for clarification from CFIUS. The scope of these reviews focus on two key thresholds: Test 1: Is there credible evidence that the foreign interest exercising control might take action that threatens national security? Test 2: If yes, do laws other than Exon-Florio and the International Emergency Economic Powers Act provide adequate and appropriate authority for the President to protect national security? If consensus exists that no credible threat to national security exists, or threat has been mitigated, CFIUS decides-within 30 days-not to open a further investigation. If threats exist, or agencies are divided, CFIUS conducts an investigation for an additional 45 days, after which CFIUS is required to file a report with the President. The President will have 15 days to make a decision whether or not to block a transaction. Org. for Int'l Inv., supra note 14.
27. Org. for Int'l Inv., supra note 14.
28. Cf. JAMES K. JACKSON, CONG. RESEARCH SERV., THE EXON-FLORIO NATIONAL SECURITY TEST FOR FOREIGN INVESTMENT 4 (2006), available at http://www.fas.org/sgp/crs/ natsec/RS22197.pdf ("Despite the voluntary nature of the notification, firms largely notify voluntarily because the regulations stipulate that foreign acquisitions that are governed by the Exon-Florio review process that do not notify the Committee remain subject indefinitely to divestment or other appropriate actions by the President.").
29. House Panel Votes to Block Ports Deals, FOXNEWS. COM, Mar. 9, 2006, http://www.foxnews.com/story/0,2933,187147,00.html (discussing the congressional decision to block the takeover of several U.S. ports by UAE company Dubai Ports World);
30. US Lawmakers Meddle in CNOOC's Unocal Bid, CHINA DAILY, July 6, 2005, http://www.chinadaily.com.cn/english/doc/2005-07/ 06/content_457677.htm (discussing congressional interference in the proposed Unocal merger). Some commentators have speculated that the block of the CNOOC bid was in part because of "[a]nti-China sentiment in Congress" which had been "building for several years, stemming from security concerns, complaints of currency manipulation and intellectual property theft, and other unfair trade practices." Ben White & Justin Blum, Chinese Consider Assurances to Unocal, WASH. POST, July 14, 2005, at D3.
31. LARSON & MARCHICK, supra note 15, at 3.
32. Emad Mekay, China Oil Bid Tests US Free Market Rhetoric, ASIA TIMES ONLINE, July 15, 2005. http://www.atimes.com/atimes/China/GG15Ad01.html (citing a poll stating that 73 percent of those polled disapproved of the prospective merger at the time).
33. Foreign Investment and National Security Act of 2007, Pub. L. No. 110-49, 121 Stat. 246 (amending 50 U.S.C. app. § 2170 (2000));
34. Press Release, The White House, President Bush Signs Foreign Investment and National Security Act of 2007 (July 26, 2007), available at http://www.whitehouse.gov/news/releases/2007/07/20070726-6.html.
35. Alan Rappeport, Bill Would Broaden Scrutiny of Foreign Investments, CFO.COM, July 13, 2007. http://www.cfo.com/article.cfm/9494378/ c_9494881 (citing Foreign Investment and National Security Act of 2007, H.R. 556-4, 110th Cong. (2007) (enacted)).
36. Id.
37. Id.
38. H.R. Res. 344, 109th Cong. (2005). The resolution "express[ed] the sense of the House of Representatives that a Chinese state-owned energy company exercising control of critical United States energy infrastructure and energy production capacity could take action that would threaten to impair the national security of the United States." Id.
39. See supra note 27.
40. See, e.g., Peter S. Goodman, China Tells Congress to Back off Businesses, WASH. POST FOREIGN SERVICE, July 5, 2005, at A1.
41. Bill Powell, The Energy Game, TIME ASIA. May 23, 2005, http://www.time.com/time/asia/2005/china_resource/china_oil.html.
42. US Lawmakers Meddle in CNOOC's Unocal Bid, supra note 25.
43. See White & Blum, supra note 25 (discussing how "[o]pposition to the Chinese firm's bid intensified in Washington" as CNOOC considered adding additional assurances to its unsolicited takeover bid).
44. Id.
45. Id.
46. H.R. Res. 344, 109th Cong. (2005).
47. CNOOC Withdrawal Clears Way for Chevron Merger, EAST BAY BUS. TIMES, Aug. 2, 2005, http://www.bizjournals. com/eastbay/stories/2005/08/01/daily11.html.
48. See, e.g., US Lawmakers Meddle in CNOOC's Unocal Bid, supra note 25 ("China angrily responded to a vote by US lawmakers last week that urged the US administration to block CNOOC's 18.5-billion-dollar takeover bid for Unocal.").
49. Id. (quoting a Chinese foreign ministry statement).
50. CNOOC Withdrawal Clears Way for Chevron Merger, supra note 41.
51. See Mekay, supra note 27 ("[A] move by Congress to block the deal outright would send a message that US rhetoric about open investment rules 'is a one-way street.'"). Even before the merger attempt fell apart, commentators suggested that this was a test for the U.S. free-trade rhetoric in Asia. Id.
52. OECD REPORT, supra note 5, at 2 ("On 8 August 2006 the Ministry of Commerce... posted... a new set of Regulations on the Acquisition of Domestic Enterprises by Foreign Investors....");
53. CNOOC Withdrawal Clears Way for Chevron Merger, supra note 41 (noting the withdraw of the Unocal bid in August of 2005);
54. see also E-mail from Jonathan Ocko, Professor and Head, North Carolina State University Department of History, to author (May 1, 2008, 23:05:49 EST) (on file with the Duke Law Journal) ("[I]n the fall of 2006, I had a conversation with a senior official in the National Development and Reform Commission who wouldn't come right out and say that China had copied US statutes.... Instead he observed that American lawyers were always lecturing China on the need to learn from US legislation, and that China had simply followed this advice....").
55. OECD REPORT, supra note 5, at 2 ("The new policy towards cross-border mergers and acquisitions is explained in the 11th five-year plan for utilising foreign investment, published by the National Development and Reform Commission (NDRC) on 9 November 2006. This states that priority will be given to quality rather than quality of foreign investments....").
56. See discussion infra Part I.C.
57. See generally OECD REPORT, supra note 5, at 1-2 (reviewing Chinese foreign investment policy in an effort to "contribut[e] to the OECD's co-operation with China to develop more open, transparent and non-discriminatory investment policies in support of China's development").
58. ORG. FOR ECON., CO-OPERATION AND DEV., CHINA'S FDI POLICIES 8 (2003), available at http://www.oecdwash.org/PDFILES/china_fdi_update.pdf.
59. Id.
60. Waiguo touzi zhibing goujing nei qiye zhixing guiding [Interim Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors], supra note 4; Neumann & Zhang, supra note 4, at 21.
61. Waiguo touzi zhibing goujing nei qiye zhixing guiding [Interim Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors], supra note 4.
62. Id.
63. See Neumann & Zhang, supra note 4, at 21 ("[O]ver 250 Chinese enterprises worth more than US$14 billion have been acquired by foreign purchasers.").
64. Id.
65. See Russell Flannery, A China That Can Say No, FORBES.COM, Sept. 18, 2006, http://www.forbes.com/business/ global/2006/0918/096.html (describing the controversy).
66. Id.
67. Id.
68. See id. ("Sany aims to block the purchase of its bigger government-owned domestic rival, Xugong Group Construction Machinery, by America's well-connected Carlyle Group."). See generally Xiang Wenbo de Boke [Blog of Xiang Wenbo], http://xiangwenbo.blog. sohu.com/entry/#entry (July 7, 2006, 22:03; July 11, 2006, 19:07) (explaining Xiang Wenbo's distrust for the American takeover and opposition to it).
69. See Xiang Wenbo de Boke [Blog of Xiang Wenbo], supra note 60 (June 8, 2006, 17:40-Sept. 22, 2006, 22:37).
70. War of Words in Company Takeover Battle, PEOPLE'S DAILY ONLINE, June 16, 2006, http://english.peopledaily.com. cn/200606/16/eng20060616_274537.html.
71. Largest Machine Tool Manufacturer to Sell Shares, XINHUA, Nov. 29, 2006, http://news. xinhuanet.com/english/2006-11/29/content_5406343. htm.
72. See id. (discussing the sale of 49 percent of China's largest machine tool manufacturer). Sany was still not satisfied; the president of the company called the deal "illegal" and alleged that the Carlyle Group had manipulated the system to result in a higher share of control than what the central government had agreed upon. Xiang Wenbo de Boke [Blog of Xiang Wenbo], supra note 60 (Aug. 5, 2006, 11:12).
73. See OECD REPORT, supra note 5, at 2 ("On 8 August 2006 the Ministry of Commerce... posted... a new set of Regulations on the Acquisition of Domestic Enterprises by Foreign Investors....");
74. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 61 ("These Regulations shall come into force as of September 8, 2006.").
75. Compare Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2 (promulgating more detailed rules for the regulation of foreign investment), with Waiguo touzi zhibing goujing nei qiye zhixing guiding [Interim Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors], supra note 4 (presenting a basic outline for the regulation of foreign investment).
76. Several authors have speculated on the most important aspects of the changes. See, e.g., Fei Ya, CSRC Releases New M&A Rule, CHINA DAILY, Aug. 3, 2006, http://www.chinadaily.com.cn/ brzchina/2006-08/03/content_656053.htm ("The new rule... is expected to give more options to acquirers, reduce takeover costs and increase takeover efficiency.");
77. Client Alert, supra note 8, at 1 ("The key changes introduced by the Acquisition Regulations relate to the reporting procedures to, and approval by, MOFCOM.").
78. See Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, arts. 27-29 (providing for acquisitions by foreign investors of domestic enterprises through the "payment of equity interests" in certain circumstances). Before these rules, this method of payment was not allowed.
79. See Waiguo touzi zhibing goujing nei qiye zhixing guiding [Interim Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors], supra note 4 (not providing for the use of equity interests as a form of payment in an acquisition).
80. OECD REPORT, supra note 5, at 3 ('"Famous trademarks' can be certified by a People's Court and also by Chinese administrative agencies, including the Trademark Office of the State Administration for Industry and Commerce. Since People's Court certifications are not listed publicly, it is difficult for foreign investors to see whether a trademark falls into the category of 'famous trademarks.' It is not usual for developed countries to restrict cross-border mergers or acquisition by reason of 'famous' trademark or 'traditional' brands.").
81. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12.
82. Id.
83. OECD REPORT, supra note 5. at 3.
84. See id. ("Chinese government agencies charged with implementing the new regulations may not have enough information to be able to apply these terms to an actual transaction.").
85. Id.
86. It is also important to recognize that the Chinese system is still in transition between a fully state owned and operated economy and a private market economy. See Corinna-Barbara Francis, Quasi-Public, Quasi-Private Trends in Emerging Market Economies: The Case of China, 33 COMP. POL. 275, 275 (2001) (describing the "interdependence and mutual constitution of state and market" in modern capitalist states). The distinctive nature of the Chinese economy often makes it difficult to differentiate between what is private and what is government. See id. ("While market transitions have contributed to the emergence of new, relatively autonomous market and social forces, they intersect with the state in complex ways.... These features make it difficult clearly to draw the boundaries of the state and to say where the state ends and 'society' and 'the market' begin."). This impacts the way that the government analyzes domestic takeovers in part because when government assets are to be sold to private entities, other governmental bureaus must be involved.
87. See Robert Lewis, Chinese SOEs: Playing the State Asset Game, INT'L FIN. L. REV., Jan. 2008, at 11, 11-12, available at http://www.iflr.com/?Page=17&ISS=24509&SID= 700971 (discussing the role of the State-owned Assets Supervision and Administration Commission in the sale of State Owned Enterprises). Thus, Article Twelve truly could extend to small, localized, partially government owned corporations.
88. OECD REPORT, supra note 5, at 4. The OECD wondered whether the new procedures would differentiate between domestic organizations and foreign investors with respect to monopoly law: The OECD's 2006 Review also noted that "the 2003 Interim Provisions contain regulations on pre-merger notification that appear to discriminate against foreign investors and others that are based on unquantifiable pre-merger notification thresholds." The Review welcomed the Chinese government's intention to promulgate a non-discriminatory anti-monopoly law and meanwhile recommended changes to the merger notification procedures in the 2003 Interim Provisions to increase their transparency. It was understood informally from the Chinese authorities that they intended to replace the discriminatory merger notification procedures in the 2003 Interim Provisions with a merger notification procedure in the anti-monopoly law that did not distinguish between domestic enterprises and foreign investors. This reassurance was needed in view of recent calls from some officials for the new anti-monopoly law to block undesirable cross-border acquisitions, following a report by the State Administration for Industry and Commerce (SAIC) in 2004 that foreign companies were building monopolies in China (an allegation that MOFCOM has since publicly refuted). The merger notification procedures in the 2006 Regulations do not reflect the OECD's recommendations and are essentially the same as those in the 2003 Interim Provisions. It remains to be seen whether these procedures will be rescinded when the anti-monopoly law is promulgated and whether there will be any distinction in the anti-monopoly law between domestic enterprises and foreign investors. Id.
89. Id.
90. Client Alert, supra note 8, at 1.
91. Id.
92. Id. at 3. For example, Baker & McKenzie, a law firm with wide experience in the Chinese market, explained concerns about the new rules in a recent client alert: In light of recent reports that a number of foreign investors have run into difficulties when attempting to acquire majority stakes in Chinese companies, even in the absence of express legal restrictions on foreign equity participation, these new provisions have sparked concerns among foreign investors that future acquisitions will be subject to much tighter control and further scrutiny by the Chinese government. Coupled with the lack of clarity on terms such as "key industry" and "national economic security," there is considerable uncertainty surrounding the likely success or completion of forthcoming transactions. Furthermore, the need for obtaining government approval at the central level may also cause delay to deals. Id.
93. Tang & Benjamin, supra note 1.
94. Id.
95. Id.
96. NBS: China's GDP Grows 10.7% in 2006, GOV.CN, Jan. 25, 2007, http://www.gov.cn/english/2007-01/25/content_507608.htm.
97. Tang Fuchun, China's Top 10 Mergers and Acquisitions Revealed, CHINA.ORG.CN, Jan. 11, 2007, http://www.china.org.cn/ english/BAT/195761.htm.
98. See id. (describing insufficient financing levels for mergers). The Chinese management of the targeted corporation may also be negatively affected because if the foreign investor's equity stake is reduced, then there is less equity available for Chinese management of the targeted corporation.
99. See David Patrick Eich & Chuan Li, Private Equity Investments In China: Impact of Recent Legal Reforms, VENTURE CAPITAL REV. (Nat'l Venture Capital Ass'n and Ernst & Young LLP, Arlington, VA), Winter 2007, at 7, 9, available at http://www.kirkland.com/siteFiles/kirkexp/publications/2261/Documentl/ Recent_Legal_Reforms.pdf ("Historically it was therefore common for foreign investors acquiring a Chinese company... to offer Chinese management an opportunity to own equity interests in the offshore holding company established to make the acquisition."). The management is often working with the foreign acquiror and using the foreign equity to essentially create a management leveraged buyout of the target. Id.
100. See discussion supra Part I.B.
101. Tang & Benjamin, supra note 1, at 3.
102. See, e.g., U.S. Dep't of State. Rule of Law, http://usinfo.state. gov/dhr/democracy/rule_of_law.html ("[I]n the United States, the rule of law is based primarily on the U.S. Constitution and on the assurance that U.S. laws-in conjunction with the Constitution-are fair and are applied equally to all members of society.").
103. See Testimony on Rule of Law in China: Hearing Before the S. Comm. on Foreign Relations, 109th Cong. 10 (2005) (statement of Minxin Pei, Director of the China Program, Carnegie Endowment for International Peace), available at http://www.senate.gov/̃foreign/testimony/2005/PeiTestimony050607.pdf (explaining that although China has made significant steps toward modernizing its legal system, it is still in need of additional reforms).
104. See id. at 4-9 (describing China's struggles with a lack of judicial independence, insufficient judicial authority, political corruption in the judicial system, and a dearth of and respect for the rule of law).
105. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12; LARSON & MARCHICK, supra note 15, at 4.
106. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12.
107. Id. Although the rule does provide that a merger or acquisition of a domestic enterprise by a foreign entity fitting the criteria listed in Article 12 that is not submitted it will be undone, there is no promise that the Ministry of Commerce will not later halt or undo approved transactions. Id.
108. LARSON & MARCHICK, supra note 15, at 4.
109. Id.
110. Id. Congress has, however, intervened in special circumstances, such as CNOOC's proposed takeover of Unocal, even when the CFIUS has approved a merger. White & Blum, supra note 25.
111. See Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, § III (articulating a loose framework for analysis).
112. See supra note 76.
113. LARSON & MARCHICK, supra note 15, at 4.
114. See supra note 76.
115. See Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 8 (setting out criteria for approval without definite timelines).
116. Compare LARSON & MARCHICK, supra note 15, at 10-13 (describing various mechanisms for communication between investors and the U.S. government), with Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12 (refraining from discussing any appeals process). There may be relief available through external sources such as the Administrative Procedure Law or political appeals. See Administrative Procedure Law of the People's Republic of China (promulgated by the President of the People's Republic of China. Apr. 4, 1989. effective Oct. 1, 1990) art. 2, available at http://www.cecc.gov/ pages/newLaws/adminLitigationENG.php (English translation). There is not, however, a system for appeal specified in the M&A rules. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 8.
117. See LARSON & MARCHICK, supra note 15, at 4 ("[The Exon-Florio Amendment] empowered the president to block mergers and acquisitions of U.S. companies by foreign firms when such takeovers threatened national security and where that threat could not be addressed effectively through other laws and regulations.").
118. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12.
119. The U.S. rules state at their outset that the rules are not intended to be used to retaliate against foreign countries and that the rules are not a departure from the U.S. market's openness to foreign capital. See CFIUS, supra note 12 ("[T]he Committee on Foreign Investment in the United States ('CFIUS')... seeks to serve U.S. investment policy through thorough reviews that protect national security while maintaining the credibility of our open investment policy and preserving the confidence of foreign investors here and of U.S. investors abroad that they will not be subject to retaliatory discrimination."). This underscores the intended narrowness of the U.S. rules. See id. (explaining that the Exon-Florio Amendment was intended to operate in congruence with the United States' tradition of "welcom[ing] Foreign Direct Investment... and providing] foreign investors fair, equitable and nondiscriminatory treatment with few limited exceptions designed to protect national security").
120. The official understanding of the Chinese M&A Rules is that they are a policy planning tool. See Sustainable Investment and Not Speculation, XINHUA, Sept. 18, 2006, http://news. xinhuanet.com/english/2006-09/18/ content_5102935.htm ("The new laws are designed to help China maintain market order and balance national economic security and fair competition. The amendments ensure the protection of indigenous industries but also continue to encourage the investment enthusiasm of foreign companies."). These comments show how broad the rules are really intended to be.
121. See supra notes 87-88 and accompanying text.
122. World Trade Org. (WTO), Understanding the WTO - Members, http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm (last visited Apr. 31, 2007).
123. General Agreement on Trade in Services, pmbl., Apr. 15, 1994. Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, Legal Instruments-Results of the Uruguay Round, 33 I.L.M. 1125 (1994) [hereinafter GATS].
124. See id. (explaining the rights and obligations of members along with dispute resolution in detail);
125. see also WTO, Legal Texts - A Summary of the Final Act of the Uruguay Round, http://www.wto.org/English/docs_e/legal_e/ursum_e.htm#mAgreement (last visited Apr. 31, 2008) (describing the obligations set out by the agreement).
126. GATS, supra note 110, art. I.2. Those modes of economic activity are (a) from the territory of one Member into the territory of any other Member; (b) in the territory of one Member to the service consumer of any other Member; (c) by a service supplier of one Member, through commercial presence in the territory of any other Member; (d) by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member. Id.
127. Id. pts. II, III (defining the general and specific obligations of Members).
128. Id. arts. II-XV.
129. Id. arts. XVI, XVII.
130. WTO, Main Building Blocks: Agreement, Annexes, and Schedules, http://www.wto.org/english/tratop_e/serv_e/cbt_course_e/c2s5pl_e.htm (last visited Apr. 31, 2008).
131. WTO, THE GENERAL AGREEMENT ON TRADE IN SERVICES: AN INTRODUCTION 10 (2006), available at http://www.wto.org/english/tratop_e/serv_e/gsintr_e.doc.
132. GATS, supra note 110, arts. XII-XIV bis.
133. Id. arts. XII-XIV.
134. Id. art. XIV bis.
135. See id. art. XIV (setting out these measures).
136. WTO. How the GATS is Administered, http://www.wto.org/English/tratop_e/ serv_e/cbt_course_e/c4s4pl_e.htm (last visited Apr. 31, 2008);
137. see also GATS, pmbl., Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, art. I, Legal Instruments-Results of the Uruguay Round, 33 I.L.M. 1125 (1994) ("The rules and procedures of this Understanding shall also apply to consultations and the settlement of disputes between Members concerning their rights and obligations under the provisions of [GATS]....").
138. GATS, supra note 122, arts. VI-VII.
139. WTO, supra note 122;
140. see also GATS, supra note 122, art. XVII (describing the Appellate Body and its procedures).
141. See WTO, Dispute Settlement: Appellate Body, http://www.wto.org/ english/tratop_e/dispu_e/appellate_body_e.htm (last visited Apr. 31, 2008) (describing the composition of the Appellate Body that reviews WTO arbitration decisions interpreting the GATS).
142. WTO, supra note 122.
143. Id.
144. Appellate Body Report. United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services, ¶ 138-43, WT/DS285/AB/R (Apr. 7, 2005) [hereinafter U.S.-Gambling Appellate Body Report];
145. see also Panel Report, United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services, ¶ 3.28-.29, WT/DS285/R (Nov. 10, 2004) [hereinafter U.S.-Gambling Panel Report].
146. See U.S.-Gambling Appellate Body Report, supra note 128, ¶ 66 (articulating a fourpart standard for identifying violations of the GATS);
147. see also Panel Report, Mexico-Measures Affecting Telecommunications Services, WT/DS204/R (Apr. 2, 2004) [hereinafter Mexico Panel Report] (exhibiting the method for determining a WTO violation).
148. U.S.-Gambling Appellate Body Report, supra note 128, § VI(A)(2).
149. Id. § VI(B).
150. Id. § VI(C).
151. Id.§VI(H).
152. GATS, supra note 110, art. I(2)(c).
153. Id. art. XXVIII(d)(i).
154. See GATS, supra note 110, art. XXVIII(1) (defining a "juridical person" as "any legal entity duly constituted or otherwise organized under applicable law, whether for profit or otherwise, and
155. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 1.
156. GATS, supra note 110, art. XXVIII(d)(i).
157. People's Republic of China - Schedule of Specific Commitments, Nov. 10, 2001, WT/MIN(01)/3/Add.2 ("The proportion of foreign investment in an equity joint venture shall be no less than 25 per cent of the registered capital of the joint venture.").
158. Id. The schedule states that [t]he establishment of branches by foreign enterprises is unbound, unless otherwise indicated in specific sub-sectors, as the laws and regulations on branches of foreign enterprises are under formulation.... Representative offices of foreign enterprises are permitted to be established in China, but they shall not engage in any profit-making activities except for the representative offices under CPC 861, 862, 863, 865 in the sectoral specific commitments. Id.
159. Id. ("The land in the People's Republic of China is State-owned. Use of land by enterprises and individuals is subject to... maximum term limitations [specified in the schedule].").
160. Id.
161. Id. Therefore, an initial inquiry would be whether the new Chinese M&A Rules are more restrictive than rules or customs in existence in 2001, when the China joined the WTO. See infra note 145 and accompanying text. This question may not be controlling, however, because there is nothing in the schedule of commitments that exempts China from following GATS rules that would require China to be less restrictive in its approach to foreign acquisitions of domestic enterprises than the 2001 rules. See infra note 145 and accompanying text.
162. See generally id. (showing that most of the exceptions expire within a two to five year period).
163. WTO, China - Member Information, http://www.wto.org/English/thewto_e/ countries_e/china_e.htm (last visited Apr. 31, 2008).
164. By providing that many limitations would expire once China joined the WTO, the Chinese schedule of commitments further indicates an intention to gradually open almost all domestic markets to international competition.
165. See U.S.-Gambling Appellate Body Report, supra note 128, ¶ 215 (looking at the consistency of the measures and then their consistency with the GATS).
166. GATS, supra note 110, art. XVI(1) (footnote omitted).
167. U. S. -Gambling Appellate Body Report, supra note 128, ¶ 215.
168. See People's Republic of China - Schedule of Specific Commitments, supra note 139 ("The conditions of ownership, operation and scope of activities, as set out in the respective contractual or shareholder agreement or in a license establishing or authorizing the operation or supply of services by an existing foreign service supplier, will not be made more restrictive than they exist as of the date of China's accession to the WTO." (emphasis added));
169. supra notes 139-46 and accompanying text.
170. GATS, supra note 110, art XVI(1) n.8.
171. Id. art. XVI(2)(f).
172. See, e.g., id. art. 4 (stating in part that "[a]n acquisition shall not result in a foreign investor owning all of the equity interests" of certain specified industries).
173. Cf. Mexico Panel Report, supra note 129 (finding that Mexico was blocking the US access to the Mexico telecommunications market by not guaranteeing access on a cost based basis).
174. Cf. Largest Machine Tool Manufacturer to Sell Shares, supra note 63 (discussing how the Carlyle Group's bid to takeover Xugong was rejected for fear of foreign control).
175. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, arts. 10-12.
176. See U.S.-Gambling Appellate Body Report, supra note 128. ¶ 238 ("[L]imitations amounting to a zero quota are quantitative limitations.").
177. Id.
178. Id.
179. See discussion infra Part II.B;
180. see also Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, arts. 10-12 (not specifying the criteria that will be used to determine whether an acquisition is a threat to national economic security or the procedure by which such an evaluation will be made).
181. GATS, supra note 110, art. XVII.
182. Id. art. XVII(1).
183. People's Republic of China - Schedule of Specific Commitments, supra note 139.
184. Id. GATS, supra note 110, art. XVII(3). The only exception listed in China's schedule of commitments as to national treatment is a stipulation that China is "unbound for all the existing subsidies to domestic services suppliers in the sectors of audio-visual, aviation and medical services." People's Republic of China - Schedule of Specific Commitments, supra note 139. Thus, the schedule leaves all other industries in which commitments have been undertaken unprotected. Further, for most of the industry specific commitments, China maintains no restrictions under national treatment for commercial presence. See id. (mandating that national treatment is "[u]nbound for all the existing subsidies to domestic services suppliers in the sectors of audiovisual, aviation and medical services"). So for most of the categories, China has not reserved the right to treat domestic and foreign entities differently as to services which China has committed to allow foreign entities to provide, including investment. Id.
185. See Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12 (stating that the rules only apply where it is an acquisition by a foreign party by a domestic corporation).
186. Id.
187. See id. art. 4 (stating that there are certain industries where foreign investors may not acquire a stake).
188. GATS, supra note 110, art. XVII.
189. See id. art. XIV (stating that behavior that would otherwise violate the GATS will be exempt under the prescribed circumstances).
190. See id. (granting exceptions only if the member nation's actions were necessary to protect important interests including public safety and order, human life or health, data privacy, and enforcement of contracts).
191. See U.S.-Gambling Appellate Body Report, supra note 128, ¶¶ 291-372 (addressing exceptions regarding the gambling issue).
192. Id.
193. Id. "The required nexus-or 'degree of connection'-between the measure and the interest is specified in the language of the paragraphs themselves, through the use of terms such as... 'necessary to.'" Id. ¶ 292. The panel then determines whether the measures are designed to protect the specified interest, and, if they are, whether the measures are necessary. Id. ¶ 294. This Note does not examine whether the Chinese M&A Rules are necessary because the Note determines that the Chinese M&A Rules are not designed to protect any of the interests specified in the GATS exceptions. See infra notes 175-98 and accompanying text.
194. Id.
195. Id.; GATS, supra note 110, arts. XIV(a), XIV bis.
196. GATS, supra note 110, art XIV(a).
197. Id. art. XIV n.5.
198. U.S.-Gambling Appellate Body Report, supra note 129, ¶ 296 (citation omitted).
199. Id.
200. Id. ¶ 332 ("[T]he statutes prohibit the remote supply of gambling and betting services.").
201. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, arts. 10-12 (stating that Ministry of Commerce authority extends across any industry that meets the criteria set out in Articles X-XII).
202. Id. art. 1.
203. GATS, supra note 110, art. XII.
204. The Chinese government-controlled newspaper Xinhua gives market stability as the reason for the revised rules. See Sustainable Investment and Not Speculation, supra note 107 ("The [Chinese] laws are designed to help China maintain market order and balance national economic security and fair competition. The amendments ensure the protection of indigenous industries but also continue to encourage the investment enthusiasm of foreign companies.").
205. It would also be unlikely that the measure would pass the "necessity" test as applied in US-Gambling. In that decision, the Appellate Body stated that the standard of necessity is an objective standard. U.S.-Gambling Appellate Body Report, supra note 128, ¶ 304. A WTO panel must "objectively assess the 'necessity' of the measure" based on all the evidence in the record. Id. This analysis should include a "determination of whether a WTO-consistent alternative measure which the Member concerned could 'reasonably be expected to employ' is available for whether a less WTO-inconsistent measure is 'reasonably available.'" Id. ¶ 305. A "merely theoretical" alternative, however, may not be considered to be reasonably available. Id. ¶ 308. In US-Gambling, the Appellate Body found that the gambling restrictions were necessary because there was only a theoretical alternative to the restrictions, bilateral discussions between the United States and Antigua. Id. ¶ 317. In the case of the Chinese M&A Rules, WTO-compatible ways likely exist to address any concerns rather than restricting the purchase of domestic corporations by foreign investors. For example, the law could be tailored more narrowly to only disallow those mergers which would endanger public morality or public order as defined by the GATS.
206. U.S.-Gambling Appellate Body Report, supra note 128, ¶ 35 (citation omitted).
207. Id. ¶ 369.
208. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2. art. 12.
209. GATS, supra note 110, art. XIV(b) bis. The GATS security exception contains two other provisions that exempt a member nation from its rules if the nation withholds information essential to its security interests or acts pursuant to the United Nations Charter to maintain peace and security. Id. art. XIV(a) and (c) bis. Because neither of these provisions readily applies to international acquisitions, this Note does not address them.
210. The GATS permits member states to take "any action" necessary to protect "essential security interests" (i) relating to the supply of services as carried out directly or indirectly for the purpose of provisioning a military establishment; (ii) relating to fissionable and fusionable materials or the materials from which they are derived; (iii) taken in time of war or other emergency in international relations. Id. art. XIV(b) bis.
211. Id. art. XIV(b)(i) bis; Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12. Although they are not limited to military establishments, the Chinese M&A Rules contains clauses that would include such establishments as some of the corporations that cannot be acquired by foreign entities. Id. (stating that those industries that could affect national economic security must be submitted to the Ministry of Commerce for approval). In those specific cases, the exception probably applies, and China may treat foreign companies differently than domestic companies.
212. See Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 1 (stating that the provisions were created for the purpose of regulating foreign investments in China);
213. see also discussion supra Part I.C.
214. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12.
215. GATS, supra note 110, art. XIV(b)(ii) bis; Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12.
216. Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, supra note 2, art. 12.
217. See GATS, supra note 110, art. XIV(b)(iii) bis (granting an exception for national security concerns if actions are "taken in time of war or other emergency in international relations").
218. Id.
219. Scholars have questioned whether nations may raise a facial challenge to enabling legislation before a WTO tribunal. See, e.g., Roger P. Alford. Essay, Reflections on US-Zeroing; A Study in Judicial Overreaching by the WTO Appellate Body, 45 COLUM. J. TRANSNAT'L L. 196, 216, 219 (2007) (noting that "the doctrine that only mandatory laws may be subject to an 'as such' challenge is a well-established doctrine in WTO jurisprudence" but arguing that the "Appellate Body has evolved in its jurisprudence from [this mandatory/discretionary] doctrine... to an approach... that eschews the mandatory/discretionary distinction altogether and permits an 'as such' review of all methodologies that are of general and prospective application"). Legislation that merely enables a government to take an action that would violate the GATS usually does not violate the GATS unless such action is taken. See Panel Report, United States-Sections 301-310 of the Trade Act of 1974, ¶¶ 7.26-7.28, WT/DS152/R (Dec. 22, 1999). Therefore, when asserting that this legislation violates the GATS, this Note assumes that China has actually taken the action violating the GATS. On the other hand, the Chinese M&A Rules are written broadly, and only a very narrow application of the rules would comply with the GATS. See discussion supra II.A.1.a. A nation thus might properly raise a facial challenge to the rules, even though they are enabling legislation.
220. United States-Schedule of Specific Commitments, Apr. 15, 1994, GATS/SC/90, available at http://www.citizen.org/documents/ 1994_USSCHEDULEATWTO.pdf.
221. Id. at 1-14.
222. Id. at 15-76.
223. See 50 U.S.C. app. § 2170(a) (2000) ("The President or the President's designee shall make an investigation, as described in subsection (a), in any instance in which an entity controlled by or acting on behalf of a foreign government seeks to engage in any merger, acquisition, or takeover which could result in control of a person engaged in interstate commerce in the United States that could affect the national security of the United States.").
224. See discussion supra Part II.A.1.a.
225. See 50 U.S.C. app. § 2170(a) (allowing the president to review those transactions "which could result in foreign control of any person engaged in interstate commerce in the United States").
226. Id. The GATS allows for domestic regulation so long as it is "not more burdensome than necessary to ensure the quality of the service." GATS, supra note 110, art. VI.4.b. Here, the inquiry is not limited to the quality of the service. See 50 U.S.C. app. § 2170(a). ("The term 'covered transaction' means any merger, acquisition, or takeover... by or with any foreign person which could result in foreign control of any person engaged in interstate commerce in the United States."). In addition, the regulation is administered in a discriminatory manner, as it only applies to foreign firms, which would also make it an impermissible domestic regulation under GATS. See GATS, supra note 110, art. VI.1 ("In sectors where specific commitments are undertaken, each Member shall ensure that all measures of general application affecting trade 0in services are administered in a reasonable, objective and impartial manner." (emphasis added)).
227. See discussion supra Part II. A.1.a.
228. See 50 U.S.C. app. § 2170; Exec. Order No. 12,188, 3 C.F.R. 131 (1981), reprinted in 19 U.S.C. § 2171 app. at 480-82 (2000) (allowing the president or the committee to unilaterally initiate a review of a transaction);
229. supra Part II. A.1.a.
230. See 50 U.S.C. app. § 2170(a) (stating that the transactions subject to review include "mergers, acquisitions, or takeovers... by or with foreign persons which could result in foreign control of persons engaged in interstate commerce in the United States").
231. See Rappeport, supra note 29 ("[F]oreign companies could soon face greater scrutiny in the interests of national security when investing in the United States.").
232. See supra Part II.A.1.b. Given that the U.S. rules do not speak of any other motivation other than national security, it is unlikely that the United States would try to justify its actions under the public morals and public order exception. See 50 U.S.C. app. § 2170(a) (providing that the president "may make an investigation to determine the effects [of the transaction] on the national security of the United States"). The motivations of the rules are not necessarily without merit. It is entirely possible that the rules are necessary regardless of any violation of the GATS. This Note only analyzes the compatibility of the rules with the GATS for the purpose of exploring the Chinese view that the United States has been hypocritical in its free-trade stance.
233. Org. for Int'l Inv., supra note 14.
234. For an example of the United States' latitude in invoking national security interests to prevent a foreign acquisition of a U.S. enterprise, see the discussion about the CNOOC-Unocal merger supra Part I.B.
235. Pub. L. No. 110-49, 121 Stat. 246 (to be codified at 50 U.S.C. app. § 2061).
236. See Rappeport, supra note 29 (noting that the mandated investigation period increases transaction times for foreign companies, thereby "hurting [their] chances to compete fairly against a U.S. acquirer").
237. See GATS, supra note 110, pmbl. (recognizing that a goal in instituting GATS is "to establish a multilateral framework of principles and rules for trade in services with a view to the expansion of such trade under conditions of transparency").
238. See supra Part I.C.
239. See Ernst-Ulrich Petersmann, The Transformation of the World Trading System Through the 1994 Agreement Establishing the World Trade Organization, 6 EUR. J. INT'L.L 161, 184 (1995) (stating that international regimes "increase the costs of rule-infringements and induce countries to focus on the long-term advantages of reciprocal rule compliance").
240. See WTO, 10 BENEFITS OF THE WTO TRADING SYSTEM 2 (2007), available at http://www.wto.org/English/res_e/ doload_e/10b_e.pdf ("The longer term reality is that one protectionist step by one country can easily lead to retaliation from other countries, a loss of confidence in freer trade, and a slide into serious economic trouble for all....").
241. See id. at 1 ("[T]here are many over-riding reasons why we're better off with the [WTO trading] system than without it.")
242. Id.
243. See Taunya L. McLarty, Liberalized Telecommunications Trade in the WTO: Implications for Universal Service Policy, 51 FED. COMM. L.J. 1, 5 (1998) ("The conclusion of the GATS in 1994 set the stage for continued negotiations on various service sectors and subsectors.").
244. Id. at 56.
245. See id. at 57 (stating that trade liberalization leads to prosperity, which "increases the capital base for social benefits and diversity through technological innovation and more efficient resource use").
246. Id. (suggesting that technological innovation is a result of trade liberalization).
247. See WTO. supra note 218, at 5 ("The WTO's global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production (because imports used in production are cheaper) and reduced prices of finished goods and services....").
248. Deepak K. Datta et al., Factors Influencing Wealth Creation from Mergers and Acquisitions: A Meta-Analysis, 13 STRATEGIC MGMT. J. 67, 68-70 (1992).
249. China's Presence in WTO Benefits Developing Countries: Official, PEOPLE'S DAILY ONLINE, Nov. 14, 2002, http://english.peopledaily.com.cn/200211/14/eng20021114_106823.shtml.
250. Id.
251. See JAMES K. JACKSON, CONG. RESEARCH SERV., TRADE AGREEMENTS: IMPACT ON THE US ECONOMY 13 (2005), available at http://shelby.senate.gov/public/_files/_pdfs/Trade.pdf (citing estimates of the financial impact of trade agreements on the U.S. economy). For a more detailed look at the benefits of globalization to the U.S. economy, see generally Scott C. Bradford et al., The Payoff to America from Global Integration, in THE UNITED STATES AND THE WORLD ECONOMY: foreign economic policy for the next decade 65, 65-109 (C. Fred Bergsten & the Inst. for Int'l Econ. eds., 2005).
252. See WTO, supra note 218, at 4 (stating that trade agreements provide benefits for smaller countries as well as for the leading economic powers).
253. See Bradford, supra note 229, at 65 ("[T]he United States has led the world in negotiating freer international trade and investment.").
254. Compare WTO, supra note 218, at 2 ("The WTO trading system plays a vital role in creating and reinforcing that confidence that arises from knowing that other countries will not engage in protectionist behavior."), with Denise H. Froning, The Benefits of Free Trade: A Guide for Policy Makers, HERITAGE FOUND., Aug. 25, 2000, http://www.heritage.org/Research/TradeandForeignAid/BG1391.cfm ("Free trade helps to spread the value of freedom, reinforce the rule of law, and foster economic development in poor countries.").
255. See, e.g., LARSON & MARCHICK, supra note 15, at 4 (describing Congress's concerns about foreign investments in the United States);
256. CFIUS, supra note 12 (stating that the purpose of the provision is "to serve U.S. investment policy through thorough reviews that protect national security while maintaining the credibility of our open investment policy");
257. supra note 27.
258. See Sustainable Investment and Not Speculation, supra note 107 ("The new Chinese rules are aimed to properly regulate the merger and acquisition practice, because many problems have surfaced in this area. Some of the deals have damaged the market order and even threatened the country's economic security.");
259. see also Neumann & Zhang, supra note 4, at 21 ("The New Provisions reflect fundamental underlying concerns that foreign interests are acquiring capacity and market share in China, without adequate oversight by the central government....");
260. Tang & Benjamin, supra note 1 ("China is trying to manage the influence of foreign companies on their domestic economy...." (quoting Christopher McNally, a China specialist)).
261. See supra notes 233-34.
262. See supra note 233.
263. See supra note 234.
264. See OECD REPORT, supra note 5, at 3.
265. See supra Part I.A-C; cf. New Rules for Chinese Company M&A Transactions Involving Foreign Investors, KIRKLANDPEN (Kirkland & Ellis LLP, Chi., Ill.), Sept. 1. 2006, at 1, available at http://www.kirkland.com/siteFiles/Publications/2862933E994B6CCBC83903986270 D0C5.pdf (suggesting that "Chinese authorities are keen to protect their key industries and assets, a reaction not completely dissimilar" to the United States' interference with the CNOOC merger).
266. See, e.g., Carlyle to Buy Minority Stake in Xugong, TAIPEI TIMES, Mar. 20, 2007, at 10, available at http://www.taipeitimes.com/News/worldbiz/archives/2007/03/20/2003353109 (noting that China's actions in protesting the Carlyle Group merger may have been protectionist in nature).
267. See discussion supra Part II.A.1-2.
268. See discussion supra Part II.B.