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January, 2018

Ant Financial fails in bid to acquire Moneygram

Original article: BBC

Alibaba's Ant Financial has withdrawn its $1.2 billion bid for the U.S. money transfer firm Moneygram in the face of staunch opposition from American regulators. In a joint statement, the two companies said the Committee on Foreign Investment in the United States (CFIUS) had refused to give a green light to the deal.

Analysis:

The jettisoning of this deal comes as no surprise. It's less about particular opposition to Alibaba than a broader recalibration of economic ties between the U.S. and China. The Trump Administration has been signaling for months that it will take a more robust line on trade with China than any of its predecessors. In September, President Trump blocked an attempt by Beijing-backed Canyon Road Capital Partners to buy the U.S.'s Lattice Semiconductor. 


As noted by The Wall Street Journal, CFIUS has yet to approve a bid by HNA Group Co. to buy a controlling stake in Anthony Scaramucci's SkyBridge Capital and China Oceanwide Holdings Group Co.'s $2.7 offer for the U.S. insurer Genworth Financial Inc. 


Things aren't going to get any easier for Chinese firms looking to acquire prime U.S. assets. The fundamental problem is that Washington now views Beijing as a strategic competitor - and is shifting its management of bilateral ties to reflect that new perception. In essence, that means barring Chinese investment in sensitive industries, especially those with military applications. 


To some degree, this shift was inevitable. China's emergence as an economic superpower necessitates a different approach to Sino-U.S. relations than the one forged during the Nixon Administration - a time when the PRC was impoverished. 


Indeed, China now boasts some of the world's largest technology enterprises by market capitalization. Firms like Alibaba, Tencent, and Baidu, have increasingly impressive intellectual property portfolios. 


Those companies have evolved in a highly protected domestic market. While some U.S. technology firms - Intel, Cisco, Apple - have lucrative China businesses, foreign companies often have to part with proprietary trade secrets to secure market access. In the long run, forced technology transfers will harm those businesses even if they profit in the short term. 

If Beijing expects its own companies to enjoy open access to the U.S. market, it will first need to level the playing field at home. That will require opening up more industries to foreign investment, eliminating forced technology transfers and further bulwarking the existing system of IP protection. All of those steps would intensify healthy competition and spur innovation, ultimately benefiting Chinese companies and the Chinese economy.

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