For Chinese companies, access to US market not guaranteed

(Ecns.cn) –- U.S. officials say they may deny China Mobile's license to provide international information service in the country, despite having recently approved the Industrial and Commercial Bank of China (ICBC) to buy a controlling stake in Bank of East Asia's U.S. unit, reports the China Economic Weekly.

When Gary Locke, now U.S. Ambassador to China, responded to the issue, he said that the United States welcomes different investments from China, but clearly he did not mean all of them.

In recent years, many Chinese enterprises have pushed to expand their businesses abroad, and the United States is inevitably a top choice. But a keen desire to invest there does not always bring about a good result.

First takeover of US bank

On May 9, 2012, the U.S. Federal Reserve approved plans by ICBC, China Investment Corporation and Central Huijin Investment Ltd to jointly purchase a majority stake in the U.S. subsidiary of Bank of East Asia, a move that came just days after high-level economic talks between the two countries in Beijing.

It was the first time for state-owned enterprises to purchase a U.S.-invested bank. Meanwhile, the Fed also gave permission to Bank of China and the Agricultural Bank of China to set up branches in Chicago and New York.

Allowing China-invested banks to increase their presence in the U.S. will help them expand the market overseas, according to Xiao Lian, director of the Center for U.S. Economic Studies at the Chinese Academy of Social Sciences.

During the talks with the U.S., China actually made some concessions, revealed Xiao. For example, the U.S. can, in the future, increase its investments in Chinese financial institutions from the previous 33 percent to 49 percent, he said.

Though it is a positive signal for other Chinese banks that wish to enter the American financial system, such an open policy may not last, warned Zeng Danshuo, a senior economist at the Ministry of Commerce.

Finance is always an important factor for a country, and this policy exists partly because developed countries, including the U.S., are all facing financial crises right now, said Zeng. The window can be shut at any time, and there is also much uncertainty about who will be the next American president, he added.

Successful deal

Dalian Wanda Group Corp Ltd, the owner of China's largest movie theater chain by box office receipts, announced Monday that it will buy AMC Entertainment Holdings, a major U.S. cinema chain, for US$2.6 billion in the country's biggest takeover of an American company to date, according to the China Economic Weekly.

A different brokerage was in charge of the business in April of last year when the purchase plan was first on the agenda, revealed an unnamed insider, who said the purchase is now in its final phase.

On May 8, 2012, Zhang Guohua, deputy general manager of Wanda Group, uploaded a photo of himself standing in front of both AMC and Loews movie theaters to his microblogging site. Since then, the acquisition has eventually surfaced.

According to Wanda Group, under the terms of the deal it will assume the debt of the AMC cinema chain and invest up to US$500 million to pay for its strategic and operating initiatives in the future.

With this purchase, Wanda will move up the technology ladder by obtaining access to many things it could not buy in the past, and at the same time get the market share of imported films from AMC.

Not so lucky

China Mobile, the world's largest mobile service provider by users, is also demanding more presence in the American market, but is now facing resistance from the U.S. government instead.

Since October last year, China Mobile has applied for a license to open long-distance mobile service between China and the U.S. and build communication infrastructure in the American territory.

However, officials from the FBI, the Department of Homeland Security and the Justice Department's national security division are concerned that the license would allow China Mobile to monitor and route Internet traffic there.

They also worry it would pose a potential threat to government information and the intellectual properties of American companies, according to an unidentified source.

Wang Yulong, chairman of the Chinese Listed Companies' Association in the U.S., said it also has much to do with the performance of China Unicom and China Telecom in the country. The U.S. has gained little benefit since approving them to provide services there, he revealed.

If China Mobile promises to provide one million jobs for Americans after it enters the country, the results may be more positive, Wang joked.

According to a report released by the Asia Society in 2011, China made 244 foreign direct investments (FDI) in the U.S. between 2003 and 2010 with a value of US$11.6 billion. (In 2010 alone, the FDI value reached US$5 billion.) The investments have also provided 10,000 jobs to local residents.