China’s iCarbonX could be forced to sell stake in US firm over security risks

An iCarbonX representative did not respond to emailed queries sent on a public holiday in mainland China. Likewise, CFIUS did not respond to an email sent outside of US office hours.

iCarbonX is the latest in a series of cases where Chinese companies have either been forced to divest their current holdings in a US company or have been blocked from investing or acquiring one over national security and data handling concerns.

Beijing Kunlun Tech, which in 2018 acquired 100% of gay dating app Grindr, caught the attention of CFIUS last month over concerns that personal data collected by the app – such as sexual orientation – could be used to blackmail American officials or defense contractors.

A Reuters report citing anonymous sources said that Kunlun may be forced to sell the social network, although the company later put out a filing stating that while it is in talks with CFIUS, no deal has yet been reached.

In 2018, CFIUS also blocked a high-profile acquisition of money transfer service MoneyGram by Ant Financial, the financial arm of Alibaba Group Holding.

CFIUS has the power to review or block foreign investments in US companies if they are deemed to be a national security risk.

While the committee has traditionally reviewed larger transactions that could result in a foreign person or company taking a controlling stake in a domestic firm, an expansion by the Trump administration last year now allows CFIUS to oversee smaller transactions or deals involving non-controlling stakes.

The clampdown has resulted in a sharp decline in Chinese foreign direct investment to the US, according to data from research firm Rhodium Group. Chinese investments shrank 90% to US$4.8 billion in 2018, from US$29 billion the previous year.

Note: Alibaba is the parent company of the South China Morning Post.

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