The deal, which would have seen China-backed Canyon Bridge Capital Partners acquire the American firm, was blocked over national security concerns.
“Today, consistent with the administration’s commitment to take all actions necessary to ensure the protection of U.S. national security, the president issued an order prohibiting the acquisition,” Treasury Secretary Steven Mnuchin said in a statement.
The national security risk included “the potential transfer of intellectual property” to the Chinese-backed company and the “Chinese government’s role in supporting this transaction,” according to Mnuchin’s statement.
Last month, following a request from President Trump, U.S. Trade Representative Robert Lighthizer formally started an investigation into whether China is unfairly getting hold of American technology and intellectual property.
“After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation,” Lighthizer had said in a statement.
According to the Commission on the Theft of American Intellectual Property, America’s largest trading partner – China – accounts for as much as 70 percent of the losses the United States incurs.
China’s successful growth strategy relies on acquiring science and technology at any costs both legally and illegally. Their national industrial policy goal encourages IP theft, and an extraordinary number of Chinese in business and government entities are engaged in this practice.
In July last year, a Chinese national was sentenced in Los Angeles to three years and 10 months in prison for hacking US defense contractors. The group managed to steal sensitive data by hacking into the computer networks of major defense contractors and sent the information to China. It’s a known fact that Chinese hackers have been spying on governments and businesses in Southeast Asia and India uninterrupted for a decade.
A Chinese Commerce Ministry spokesman stated that security inspections in sensitive industries are a legitimate right of any country but they should not become a tool to promote protectionism.
Canyon Bridge is headquartered in California, with offices in Beijing and initial funding for the firm comes from limited partners in China.
The takeover was pegged at $1.3 billion when it was first announced in November 2016.
According to research firm Rhodium Group, Chinese investment into U.S. firms so far in 2017 includes 83 deals worth about $25 billion.