House Lawmakers Call for Review of Chinese Railcar Investment

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By Rossella Brevetti

July 18 — A joint venture involving North Carolina-based rail manufacturing company Vertex Railcar Corp. and two Chinese companies should be investigated, more than 50 House lawmakers said.

The lawmakers—led by Reps. Peter DeFazio (D-Ore.), Randy Forbes (R-Va.) and Dan Lipinski (D-Ill.)—told Treasury Secretary Jack Lew in a letter released July 18 that an interagency committee he chairs should investigate the joint venture with China Railway Rolling Stock Corp. (CRRC) and Majestic Legend Holdings for national security concerns.

The interagency Committee on Foreign Investment in the United States (CFIUS) reviews transactions that could result in the control of a U.S. business by a foreign entity. The treasury secretary serves as chair of CFIUS, which can recommend to the president that transactions be blocked if they are deemed to pose a risk to national security.

CRRC is a state-sponsored entity with access to subsidized funding from the Chinese government, the lawmakers wrote. Majestic Legend Holdings is associated with Legend Holdings, the parent company of Lenovo Computers, and it is closely tied to the Chinese government, according to the letter. “American railcar manufacturers and its associated industries, such as steel, are now competing against the resources of the world’s second largest economy,” the lawmakers said.

“Allowing a foreign, state-backed entity to increase direct investment in our nation’s critical public infrastructure without appropriate review creates significant economic and national security concerns. Similar mergers involving state-owned companies have threatened other critical sectors of our economy beyond rail, such as public transit, steel fabrication, energy production, food manufacturing, real estate and more,” according to a new release on the letter.

The lawmakers also said they are concerned that “critical rail infrastructure and the sensitive cargo that it carries will become increasingly vulnerable to hackers as the proliferation of Chinese state investment continues without adequate scrutiny.”

Zhu Haiquan, spokesman for the Chinese Embassy in Washington, told Bloomberg BNA in an e-mail that he did not have any specific information about this case. “The bottom line is, vibrant two-way trade and investment between China and the United States is based on win-win cooperation, and serves the fundamental interests of both peoples. We hope the relevant U.S. politicians can put this into right perspective,” he said.

Vertex Railway Corp. did not immediately respond to a request for comment.

To contact the reporter on this story: Rossella Brevetti in Washington at rbrevetti@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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