China wealth fund wants US security rules clarified

By Rachelle Younglai

WASHINGTON, June 10 (Reuters) - Sovereign wealth fund China Investment Corp (CIC) has urged the U.S. Treasury Department to further clarify how foreign investments in the United States will be reviewed for national security risks.

CIC said in a comment letter submitted earlier this week that Treasury's proposed rules helped clarify issues in the U.S. process for reviewing foreign deals. But the fund, which has bought stakes in financial firms Blackstone Group (BX.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research), said "that further clarification would be beneficial."

In April, the Treasury Department proposed rules to carry out a law passed in 2007 to strengthen reviews after Dubai Ports World's controversial deal to buy several U.S. port operations.

Transactions in which a foreign entity acquires less than a 10 percent stake in a U.S. business are not automatically exempt from a review by the Committee on Foreign Investment in the United States (CFIUS), according to the proposed rules.

They also attempted to define control not in terms of percentage of shares or board seats, but as the ability to exercise certain powers over important matters affecting a business, even if the foreign entity does not exercise that power.

CIC urged the Treasury Department to clarify which minority shareholders will be considered to have control and which ones are not deemed to have control over a company.

The fund also urged the Treasury Department to extend the period in which businesses can respond to three days from two business days, saying that China's business day does not overlap with the U.S. business day.

"As a result, an information request... will not be communicated to CIC (or another party located in an Asian time zone, for that matter) until the following business day." it said. Prospective companies and investors can be rejected if they don't respond to information requests on time.

The Treasury Department is expected to finalize its rules later this year. (Reporting by Rachelle Younglai, editing by Dave Zimmerman)