China Firm May Want a Stake in GM

The Treasury Department two days ago said that the GMIPO would be open to investors from both inside and outside the US. The decision may be tested soon. One of the largest car companies in China, and GM's major joint venture partner there, has made inquiries into whether it might take a share of GM as it goes public.

According toReuters, "The contact between state-backed SAIC -- which has a 13-year relationship with GM -- and GM has been informal and the expression of interest by the Chinese automaker could hit a quick dead-end if the U.S. government objects to the move, several of the sources said."

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That is the "is U.S. open, or is the U.S. closed" issue at the heart of the debate about what America, and several other large nations, will do when faced with Chinese inquiries. Many of China's largest companies are partially state-owned which gives them access to vast capital resources.

One of the most well-know recent cases of the federal government intervening in the large offer from a Chinese company which wanted to by a U.S. one was the proposal that Chinese network equipment maker Huawei made to buy tech firm 3Com. American private equity firm Bain was to help finance the transaction. The U.S. viewed 3Com's technology as "strategic" and the deal fell apart. Other large transactions like a proposed $19.5 billion stake that Chinese aluminum company Chinalco planned to make in Australian-based Rio Tinto (RTP) failed because of concerns voiced by the Australian government.

It is certain that as China extends it reach for resources, access to foreign markets for its more expensive goods, and a larger intellectual property portfolio that there will be push-back by governments who want to protect themselves from China owning major interest in key economic sectors.

GM can do business in China with SAIC, but it may be that SAIC cannot do business with GM in the U.S.--at least not as a shareholder.