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Huawei, Bain, 3Com. There Will Be Blood. Because I Said So.

By Dan Harris and Steve Dickinson

The Wall Street Journal has an interesting article on the failure of the Huawei/Bain 3Com deal. The article is entitled, "Harsh Climate In Washington Ices 3Com Deal: Hope for Buyout Revival Led By Foreign Capital Dims Amid China Jitters," and it mostly focuses on how the Committee on Foreign Investment in the U.S., (CFIUS) likely would have rejected this deal and on how this likely will have "a chilling effect on foreigners' interest in U.S. firms." My favorite part of the article, for obvious reasons, is the following:

"There will be tremendous repercussions in China because of this," said Dan Harris, a Seattle lawyer who represents U.S. clients in China. "We should not be ignoring the impact that this might have on our own companies trying to do business over there."

Since the article does not explain the "repercussions," I will do so now. Many (most?) in China believe the rest of the world (the United States, in particular) do not want China to rise. China (probably rightly) perceives the US government as behind this deal's not going through. China (probably wrongly) perceives the US government's blocking this deal to keep China business down. I expect China will retaliate against US companies, but I am not yet sure how. My guess is that it will eventually block some big US deal in China, but it is possible there will be an overall tightening of law enforcement against all US companies. We will see. BTW, "No Country for Old Men" definitely deserved the best picture Oscar over "There Will be Blood." For more on Huawei/Bain/3Com, check out the following: "The China Factor: Bain-3Com Deal Withdrawn," at Sramana Mitra on Strategy "Huawei's Out, Now Who Wants 3Com?"" at the Deal Journal Blog "3Com purchase deep-sixed on national security concerns," at Ars Technica "Duncan Hunter Has Raised the National Security Alarm Over Mitt Romney. So Where Is the Scrutiny?" at BizzyBlog "National Security and Chinese Foreign Direct Investment," at Boulder2Beijing

Full post as published by China Law Blog on February 25, 2008 (boomark / email).