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McCaul, Crawford Urge Treasury Department to Review Merger Between Chinese Government-Backed Military Companies

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Washington, DC – House Foreign Affairs Committee Lead Republican Michael McCaul (R-TX), Congressman Rick Crawford (R-AR), and 14 of their House colleagues sent a letter to Secretary Yellen of the U.S. Department of Treasury requesting a review of the merger between ChemChina, Sinochem, and Syngenta AG. The Committee on Foreign Investment in the United States (CFIUS) originally approved ChemChina’s acquisition of Syngenta in 2016; however, the recently announced merger between ChemChina and Sinochem may allow CFIUS to reexamine the transaction. American agriculture producers made up over a quarter of Synogenta AG’s business in 2015 and are still a major market for the company. Both ChemChina and Sinochem are on the Department of Defense’s list of companies that directly finance the CCP’s military and intelligence operations.

“The Chinese Communist Party is aggressively targeting biotechnology through its Made in China 2025 industrial policy and commercial espionage because it is a critical and emerging sector for the global economy. Allowing the PRC to control this important sector through mergers and acquisitions would mean we aren’t genuinely pursuing strategic competition with the CCP. CFIUS should use the ChemChina and Sinochem merger to correct its mistake of letting ChemChina acquire Syngenta in 2016 to begin with,” said Lead Republican McCaul.

“The Chinese Communist Party has, for decades, taken advantage of American farmers and now want them to finance their malicious behavior. The merger of these companies is a major concern given China’s long history of engaging in economic espionage and agriculture-related intellectual property theft. The United States must protect our agriculture producers and our nation’s food supply rather than allowing American dollars to fund the CCP’s campaign to manipulate markets and expand their influence,” said Rep. Crawford.

The full text of the letter can be found here and below. 

Dear Secretary Yellen,

We write regardng the potential merger between state-owned China National Chemical Corporation (“ChemChina”) and Sinochem Group Co. (“Sinochem”) and request that the Committee on Foreign Investment in the United States (CFIUS) reexamine ChemChina’s acquisition of Syngenta AG in 2016. It appears a possible combination between ChemChina and Sinochem would likely result in a change in Syngenta’s ownership that should trigger a CFIUS review, despite CFIUS’ approval of ChemChina’s acquisition of Syngenta AG in 2016. Given the recent approval of the merger by the People’s Republic of China (PRC), we ask that this review be considered high priority.

Concerns about the PRC’sstate-owned sector and the Chinese Communist Party’s(CCP) influence over the economy, especially in strategic sectors like agriculture, have grown under General Secretary Xi Jinping. The PRC’s 2015 National Security Law expansively defines national security to include agricultural issues—which most certainly cover ChemChina’s and Sinochem’s product portfolio. The CCP also required all state-owned enterprises (SOEs) to formalize the legal status of CCP organizations in their articles of association by 2020. The same regime that is carrying out a genocide in the Xinjiang Autonomous Uighur Region is increasingly making operational decisions at its SOEs.

While the original decision reflected the view that the food supply chain of the United States remained largely secure, the CCP’s espionage and weaponization of supply chains is ringing alarms. The CCP is engaging in unprecedented economic espionage to steal biotechnology and agriculture-related intellectual property. For instance, participants of the CCP’s Thousand Talents Program, including Simon Saw-Teong Ang, a scientist in my home state of Arkansas, have been apprehended across the United States for attempting to acquire trade secrets and proprietary information at the expense of American academia and private enterprise. During the COVID-19 pandemic, which originated from Wuhan, China, the CCP has repeatedly used its supply chains and market to threaten and coerce other countries, including restricting exports of personal protective equipment and halting imports of Australian beef following their government’s call for an investigation into the origins of the pandemic. Given the CCP’s track record, consolidation of such a vital supply chain by its SOEs no longer appears tenable.

Against this backdrop, discussions re-emerged last year of a possible merger between ChemChina and Sinochem, under a holding group overseen by the Chinese State-owned Assets Supervision and Administration Commission. This causes at least two concerns. One, the merger would create the largest chemical conglomerate globally, with the equivalent of over $159 billion annually spread across critical sectors, including agriculture, industrial chemicals, and refinery. Combined with the PRC’s onerous market access restrictions and non-tariff barriers in these sectors domestically, this merger would distort international market competition and harm the long-term financial solvency of international firms engaged in these sectors. Second, both PRC firms were included in the U.S. Department of Defense’s list of companies that supply and support the CCP’s military, intelligence, and security services. As a large supplier to the American agriculture sector, transactions with Syngenta and the recently formed Syngenta Group would depend on and directly fund and support the CCP and the People’s Liberation Army – a clear and direct threat to the United States and our national security.

Since 2016, the U.S. government’s understanding of the CCP and its comprehensive national security perspective have sharpened considerably. As a result, a reexamination of this transaction is not only prudent but necessary to protect the interests of American farmers and consumers. It is imperative that we utilize every opportunity and all the tools at our disposal to prevent and counter the CCP’s expanding influence, while safeguarding our security and interests around the world.

Thank you for your attention to this matter, and we look forward to your response.

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Author: ForeignAffairs

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