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For China, buy American means something else

The United States government, including the Department of Defense, is at risk of allowing some of its most sensitive information to be seen by a Chinese company whose chairman has close ties to that country’s Communist party.

June 13, 2017

The United States government, including the Department of Defense, is at risk of allowing some of its most sensitive information to be seen by a Chinese company whose chairman has close ties to that country’s Communist party.

International Data Corp. (IDC) markets itself as “the premier global market intelligence firm.” It specializes in information technology (IT) and security, and numbers among its clients the National Security Administration, the Departments of Defense, Commerce and Energy, the U.S. Census Bureau and the General Services Administration.

Earlier this year, IDC’s parent company, based in Boston, was purchased by China Oceanwide Holdings, a Chinese conglomerate whose president and chairman, Zhiqiang Lu, has been a member of the People’s Political Consultative Conference, which advises the Chinese Communist Party.

The contracts that IDC – and now China Oceanwide – hold with the various government departments are small, less than $100,000 each. IDC provides technical advice, consultation and solutions to its clients. That means that it has access to sensitive IT data, and its IT security recommendations could potentially influence government procurements. And that access could now be available to IDC’s new owners, China Oceanwide.

IDC declined to comment for this article.

Patrick Evans, a Pentagon spokesman, acknowledged the Pentagon has contracts with IDC. In a written statement, Evans says: “The Department of Defense does not (nor does the U.S. government) have a blanket ban on products from Chinese companies, and DoD does not ‘blacklist’ suppliers or individual products.”

The sale of IDC was approved by the Committee on Foreign Investment in the United States (CFIUS), a branch of the Treasury Department that assesses potential risks from the purchase of U.S. companies by foreigners.

“CFIUS is a broken process,” says Dean Popps, a former acting assistant secretary of the army for acquisitions, logistics and technology under the administrations of George W. Bush and Barack Obama. “Since it was created 40 years ago, it has been driven by business interests, not national security. No one is in charge.” 

To be sure, Chinese companies have been on a U.S. buying spree in recent years. In 2013, Shuanghui International purchased Smithfield Foods, the world’s largest producer of pork. In 2005, Beijing-based Lenovo bought IBM’s personal computer business, a sale that the Pentagon warned posed a security risk. In 2014, Lenovo followed up by acquiring Motorola Mobility, a maker of mobile phones, from Google. China Oceanwide now owns 29 percent of Lenovo. All those deals were approved by CFIUS.

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For China buy American means something else
For China buy American means something else