WASHINGTON Nov 14 The U.S. Congress should
consider tougher screening laws for investments made by China's
huge state-owned enterprises (SOEs) because of the threat they
pose to U.S. companies, an advisory committee said in its annual
report on Wednesday.
The U.S.-China Economic and Security Review Commission, which
typically takes a tough view of relations with China, said
Beijing lavishes special favors on its state-owned companies
that could give them an unfair advantage even if they build
facilities in the United States.
"Once invested in the United States, Chinese SOEs may
continue to benefit from Chinese government subsidies that would
allow the Chinese to sell their products at less than the cost
of production. Once their U.S. competitors are driven out of
business, Chinese SOEs might dominate the market and even raise
prices," the panel said in its annual report.
The commission's 32 recommendations also called on Congress
to carry out an in-depth assessment of Chinese cyber-spying and
to weigh tougher penalties on companies found to cash in on
A separate study released last week by the commission
forecast Chinese investment to rise rapidly in coming years.
The study noted private economists put Chinese direct
investment in the United States at $30 billion through the end
of 2011, compared to official government estimates of just $5.8
billion through 2010.
In its report on Wednesday, the U.S.-China commission urged
Congress to require mandatory screenings of all investments by
Chinese state-owned or state-controlled companies where they
would gain an controlling interest in a U.S. operation.
The Committee on Foreign Investment in the United States,
made up of executive branch agencies, should also be required to
consider the net economic impact of a foreign investment on the
United States in addition to its current focus on any potential
threat to national security, the commission said.
The U.S.-China panel also recommended the U.S. Securities
and Exchange Commission be directed to look more closely at
state-owned and -affiliated companies seeking to be listed on
U.S. stock exchanges "to assure U.S. investors have sufficient
information to make investment decisions."
The report follows Fortune magazine's latest list of the
world's 500 biggest companies, which showed the United States
still in the lead with 132, down one from 2011.
China passed Japan to move into second place on Fortune's
list. It now has 73 of the world's biggest firms, up from 61 in
2011 and just 16 in 2005.
Many of the big Chinese firms are owned or controlled by the
state, the U.S.-China commission said.
They generally receive more favorable treatment in China
than foreign firms, and because of those favors and subsidies
have become formidable competitors in both the United States and
other markets around the world, the panel said.
Congress should require the U.S. Commerce Department to
annually track Chinese investment in the United States, with a
particular focus on state-owned enterprises, the panel said.