Why the U.S. Needs Chinese Investment

On Sept. 28, President Obama exercised his executive authority to block an overseas investment deal by a Chinese company on grounds it posed a potential national security threat. As a result, China’s Ralls and parent company Sany Group (600031:CH), a diversified industrial company, must discontinue plans to build a series of wind farms in Oregon because of the project’s close proximity to a U.S. naval base.

Unlike Chinese companies that have attempted overseas transactions in more sensitive industries, such as Huawei and ZTE (763:HK) in the telecommunications industry and China National Offshore Oil Corporation (CNOOC) (883:HK) in the oil and gas industry, Sany’s core business is industrial machinery and its investments are primarily guided by economic, not political interests. Sany’s investments in Europe have been welcome. Sany recently acquired Germany’s Putzmeister, a specialized cement-pump machine maker. Obama’s motivation in deciding to block Sany may well have been to help his presidential campaign: “Cracking down on China” is a spotlight issue for both the Democratic and Republican parties. If future investment decisions by Chinese companies meet similar resistance, though, the end result of such decisions will hinder, not help the U.S, economic recovery.