Is the US finally taking a tougher stand on China? Last week, AT&T Inc. walked away from a partnership with Huawei Technologies, possibly due to Washington’s worries about espionage. 

A week earlier, Ant Financial dropped its long-delayed acquisition of MoneyGram International Inc. after failing to win approval from a crucial US government committee.

Such a stand was probably inevitable, whoever occupied the White House. By showing almost no willingness to open its markets more widely or to scale back its efforts to promote local firms, China has all but invited its trading partners to retaliate.

But there’s a right way and a wrong way to pressure China. And from the looks of it, Washington is choosing the wrong way.

Take the MoneyGram deal. Blocking Ant’s acquisition was certainly a reasonable decision. For one thing, Beijing would undoubtedly prevent a US company from making a similar purchase in China. 

For another, MoneyGram collects huge volumes of personal and financial information about American citizens. No Chinese firm, no matter how honest its intentions, could resist pressure from the authorities to reveal such data.

However, the Committee on Foreign Investment in the US -- the panel tasked with reviewing such acquisitions for security threats -- never publicly said why it opposed the deal. In fact, CFIUS is prevented by law from revealing the details of its decisions in individual cases, causing it to operate with little transparency.

Investors -- whether Chinese or any other nationality -- deserve better. CFIUS should spell out clearly what it considers a risk to national security, especially if it is broadening how it defines such threats. Its final decisions and the reasons behind them should also be made public -- with redactions as needed to protect sensitive information. That way, investors can better understand which deals will be acceptable to the US government and which won’t be.

Ditto on the AT&T-Huawei fiasco. We still don’t know exactly why the proposed partnership went south. But Huawei has faced repeated resistance from US lawmakers in its efforts to expand into the American market, mainly due to fears that the telecom giant is linked to China’s government, rendering its equipment untrustworthy. Huawei has always denied that it poses any such threat.

We can debate whether or not those fears are reasonable. But if lawmakers think that Huawei or other Chinese tech firms do threaten American interests, they should make any restrictions explicit. That way companies on both sides of the Pacific know the rules of the game and can avoid embarrassments like the AT&T mess.

A step in the right direction is a bill introduced Jan. 9 in the House of Representatives. It would prohibit US government agencies from hiring contractors that use equipment from Huawei or ZTE Corp., another Chinese telecom manufacturer. Does that go too far? Well, if passed, it would at least place such restrictions formally on the books, rather than leaving them to back-room wrangling.

There are two reasons why such clarity is critical. First, Washington shouldn’t want to scare away Chinese companies. Investment from China could become a major source of new jobs in the US, and the vast majority of such deals wouldn’t be at all controversial. If Washington’s approach is inconsistent or opaque, however, Chinese companies could read it as hostility and take their money elsewhere. That’s not good for the economy or for US-China relations.

Second, Washington has an opportunity to set new standards to contend with China’s business practices. Policymakers in the European Union and elsewhere have been groping for ways to alleviate the risks of Chinese investment without annihilating its potential benefits. 

Washington could take the lead, creating a framework that could then be adopted by China’s other major trading partners, making any new policies much more effective in pressuring Beijing to open its market and curtail its tactics to unfairly promote local companies and technologies.

There’s also the simple matter of fairness. American businessmen complain about unclear and selectively applied regulation in China that hampers their ability to compete. The US shouldn’t subject Chinese companies to the same ill treatment.

Any new policy toward Chinese businesses must be grounded in the rule of law: Clear guidelines, transparent decision making and public disclosures. 

Otherwise, a tougher stance by Washington could be misconstrued as mere Chinaphobia, and thereby infect the entire relationship between the world’s two largest economies. Perhaps Washington is right to take a harder line on China. But that line should be clearly drawn.


By Michael Schuman

Michael Schuman is a journalist based in Beijing and author of “Confucius: And the World He Created.” -- Ed.


(Bloomberg)