Chinese companies planning to invest in US-based enterprises this year are likely to face a tough hurdle as the growing distrust between the two countries has prompted a secretive national security watchdog to zero-in on China's investments in the United States.

The Committee on Foreign Investments in the United States (CFIUS) is taking aim at a number of high-profile business deals involving Chinese investors in the US amid heightened tensions between the two countries, experts have claimed.

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US lawyers familiar with CFIUS say some of its member agencies are worried the Chinese government is behind some of the more prominent attempts to acquire sensitive American corporate assets. 

CFIUS is a government inter-agency panel authorized to review and block any foreign transaction or investment that could pose a threat to critical US infrastructure or national security. The committee is headed by the US Department of the Treasury, and includes the departments of homeland security and defense. 

"Innately Hostile"

Experts say CFIUS is likely to intensify scrutiny of Chinese investments in the US as relations between the two countries continue to deteriorate over US opposition to China's assertions in the South China Sea and a series of hacking attacks on US agencies which Washington attributes to Beijing. 

"There is a belief in the CFIUS community that China has become innately hostile and these aren't just business deals anymore," Jim Lewis of the Center for Strategic and International Studies (CSIS) told the New York Times earlier this month.

The fact that 2016 is an election year does not help the cause of Chinese investors, either, according to analysts, as a few influential candidates are expected to take hard line positions against China in an effort to whip up patriotic fervor behind their campaigns.

Christopher Brewster, a CFIUS expert at Stroock & Strook & Lavan LLP, says US regulators have noted an increase in China's efforts to acquire US electronics companies.  Some of the proposed acquisitons are likely to have implications on US national security.  

"When you watch the cases, you know that the China acquisitions are getting aggressive reviews," Brewster told Reuters. "And anybody who doesn't believe that can go talk to Fairchild."

"Close Ties"

Fairchild Semiconductor Inc -- a manufacturer of transistors and integrated circuits -- cited US regulatory concerns last week when it rejected a $2.4 billion acquisition offer from China Resources Microelectronics and Hua Capital Management.

The day after Fairchild refused the bid, a group of 46 US legislators -- most of them Republicans -- urged CFIUS to investigate the offer of Chonqing Casin Enterprise Group (CCEG) to buy the Chicago Stock Exchange, one of America's oldest exchanges.

"While it is unclear the level of influence the state holds over CCEG, the firm is involved in a number of important Chinese sectors that would likely require close ties to the state," said a letter from the 46 legislators to the CFIUS board.

Beyond these two deals, analysts say CFIUS is likely to scrutinize, among others, ChemChina's $43 billion bid for Syngenta and Tianjin Tianhai Investment's plan to buy the US technology company Ingram Micro for $6 billion.

On Friday, the committee issued a report indicating it had reviewed 24 of China's bids to acquire American enterprises in 2014, making China the most scrutinized among all the countries that chose to invest in the US that year.

CFIUS rarely kills a deal outright.  Instead, the panel uses back channels to quietly urge companies to abandon merger or investment plans it deems questionable. 

The committee's report says 12 notices of mergers or investments filed by Chinese companies in 2014 were withdrawn during the review process.  Only one was re-filed, indicating the other 11 proposed deals were eventually abandoned. 

CFIUS formally blocked one notice, but the report does not identify the deal or explain why it was blocked. 

TagsUS-China relations, Committee on Foreign Investments in the US, Chinese investments