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September 21, 2017

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Nations lose taste for Chinese cash

China, with US$3 trillion in its foreign reserves, is looking for investment opportunities around the world; surprisingly, perhaps, it is discovering that its money is not welcome in certain countries.

In December, Chinese Ambassador Chen Yuming reprimanded Australia for banning Huawei Technologies, the Chinese telecom equipment provider, from participation in a proposed US$38 billion national broadband network to connect 93 percent of Australian homes and businesses with optical fiber connections. He insisted that security concerns regarding Huawei were unfounded and that Australia had nothing to fear from China's rise.

The Australian prime minister, Julia Gillard, explained: "You would expect, as a government, we would make all of the prudent decisions to make sure that that infrastructure project does what we want it to do, and we've taken one of those decisions."

Huawei had problems in the United States as well. In October, the U.S. House Intelligence Committee warned after a yearlong investigation that it had come to the conclusion that two Chinese companies, Huawei and ZTE, were a national security threat because of their attempts to extract sensitive information from American companies and their loyalty to the Chinese government.

This is not a new problem for China. In 2005, China's state-owned oil company CNOOC Ltd. attempted to acquire the American oil company Unocal for US$18.5 billion. The bid triggered widespread opposition and the House of Representatives, in a lopsided 398-to-15 vote, expressed concern that the move "would threaten to impair" U.S. national security. CNOOC then withdrew its bid.

In 2009, another Chinese company, China Aluminum Corporation (Chalco), proposed to invest US$19.5 billion into the Australian-British mining giant Rio Tinto. This bid, too, was rejected following opposition by Australian political parties.

A few months ago, U.S. President Barack Obama ordered Ralls Corporation, owned by two executives of China's Sany Group, to divest itself of wind power projects in Oregon near a naval facility on grounds of national security.

Obama's decision came after CFIUS, a U.S. government interagency committee that reviews the national security implications of foreign investments, ordered a halt to the construction and operation of Ralls' four wind farms on the grounds of national security.

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