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China-U.S. Steel Deal Could Jeopardize National Security

Wed, 09/15/2010 - 4:47am
Joe McDonald, AP Business Writer

BEIJING (AP) — A state-owned Chinese company signed an agreement Wednesday to invest in a Mississippi steel mill in a deal that has prompted complaints by some U.S. lawmakers that it might jeopardize national security.

Anshan Iron & Steel Group Corp.'s investment is seen as a test of American willingness to accept Chinese investment. Some American business groups have warned that a rejection might fuel protectionist sentiment and trigger Chinese retaliation.

Anshan said it would hold a 14 percent stake and supply some technology for the mill being built by Steel Development Co. in Amory, Mississippi. Anshan said it would become a member of Steel Development's board.

Despite its small size, the announcement of the planned investment earlier this year prompted opposition in Washington. In July, 50 members of the Congressional Steel Caucus wrote to Treasury Secretary Timothy Geithner calling for an investigation.

The American Chamber of Commerce in China issued a statement welcoming the acquisition.

Chinese investment "has a positive effect on American companies, particularly start-ups like Steel Development Co., and helps create jobs at home," it said.

Last month, the chamber's chairman warned that a rejection might fuel protectionist sentiment at a time of weak global growth. "Rejecting this deal could start a cycle of antitrade measures across the Pacific that would be difficult to stop," John D. Watkins wrote in The Asian Wall Street Journal. "The national-security worry is spurious."

Chinese companies have invested billions of dollars abroad, much of it in mining and oil assets in Africa, Central Asia and elsewhere. That growing presence has triggered unease in some countries about allowing state-owned companies into industries that are deemed strategic.

Anshan chairman Zhang Xiaogang declined to say how much the company was investing but an Anshan executive said earlier it would be $7 million.

"Our investment is normal, commercial investment behavior. I don't think in the United States, a highly market-style country, it will face big opposition," Zhang said at a news conference. "The concerns will disappear as our project moves ahead."

The investment still requires final approval from Chinese and U.S. authorities, the companies said.

The chairman and CEO of Steel Development, John Correnti, said there were no changes to the deal as a result of the complaints.

"We made absolutely no changes," Correnti said at the news conference.

The facility will create 200 permanent jobs and 1,000 temporary construction jobs, the company says. It says production is due to start in 2012.

The venture includes technical support or investment from partners from the United States, Italy, Japan, Germany and Canada. Correnti said the companies have obtained environmental and other required permits and construction has begun.

Steel Development also plans to build four other mills. Zhang said Anshan would decide whether to invest in those based on its experience in Amory and the "trust relationship of the partners."

___

AP researcher Bonnie Cao contributed.

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