Last updated: December 20, 2012 5:07 pm

Beijing criticises US ‘political checks’

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Chinese wanting to invest in the US should not have to undergo “political background checks”, a top Communist party official said at the close of high level trade talks with his counterparts in Washington.

Wang Qishan, the outgoing vice-premier responsible for commerce, trade and finance, said at a dinner attended by US cabinet members on Wednesday evening there was no reason for Chinese investors to be asked about their political affiliations.

“How can you check if they belong to the Communist party or other parties?” he said, adding that Americans were not asked similar questions about their politics when investing abroad.

Mr Wang has just been promoted to the seven-member politburo inner circle, the ruling party’s most powerful body, and will soon take up his new job as the party’s anti-corruption chief. His comments about political checks touch on a long-running complaint of the Chinese: that their state-owned companies are unfairly discriminated against when trying to invest in the west.

The CEOs and senior executives of Chinese state companies are appointed, and removed, by the personnel arm of the Communist party.

But the Chinese maintain that the companies are independent business entities which make decisions on commercial grounds, not at the direction of the ruling party or the government.

With cash-rich Chinese companies poised to invest tens of billions of dollars offshore, in coming years the status of state-owned companies and their party ties are bound to stay in the spotlight.

Resource-rich countries like Australia and Canada, which are important investment destinations for China, have said investments from state-owned companies from anywhere would face more intense scrutiny.

Even private companies like Huawei, a telecommunications equipment manufacturer, have come under scrutiny in the US for their alleged party links.

A Congressional report released in October warned US companies not to do business with Huawei or Chinese telecoms company ZTE because of security concerns and their perceived closeness to the Chinese government.

In September, during the election campaign, Barack Obama ordered Chinese-controlled Ralls Corporation to cancel a wind farm project near a military base in Oregon, only the second time a US president has formally blocked a foreign acquisition and the first time since 1990.

In the first three-quarters of this year, Chinese companies invested a record $6.3bn in foreign direct investment projects in the US, according to figures from Rhodium Group, a Washington-based research consultancy.

“The pipeline of pending deals remains strong, but the increasingly heated public debate in the US is aggravating existing tensions in the US-China investment relationship,” Thilo Hanemann, research director at Rhodium, wrote in a recent report.

Mr Wang said he had received assurances during the meeting of the US-China joint commission on commerce and trade that Washington welcomed Chinese investment.

But in an otherwise largely upbeat speech in which he praised his US counterparts and talked of the two countries’ “interdependence”, he expressed some scepticism. “Some Americans lack a clear understanding of China,” he said.

The two countries have long discussed negotiating a bilateral investment treaty but have yet to launch talks. The US declined to comment on Mr Wang’s comments.

On the US side, officials hailed Chinese promises to ensure Beijing’s procurement rules did not discriminate against foreign products and to take more steps to prevent longstanding and widespread piracy and counterfeiting of US goods.

“Some of these issues may seem a bit esoteric, but they can make the difference between millions, billions of dollars of new exports and jobs being retained here at home,” said Ron Kirk, the US trade representative.

Additional reporting by Jamil Anderlini in Beijing

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