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Tuesday, March 8, 2011

China-U.S. Aviation Deal Faces Scrutiny

By Angus Loten
The proposed purchase of a Minnesota-based small-aircraft maker by China’s state-run aviation giant announced last week will be reviewed by the Committee on Foreign Investment in the U.S., the companies said in a joint statement.

The inter-agency committee reviews foreign acquisitions that pose a potential threat to national security.

Terms of the deal, between China Aviation Industry General Aircraft Co., Ltd., a unit of China Aviation Industry Corp., and Duluth-based Cirrus Aviation Industry Corp., were not disclosed. If approved, the Chinese state-run firm would have full access to Cirrus’s line of four-seat turbo-prop planes, along with technology for a small jet in development.

Cirrus CEO Brent Wouters says the two sides sought a national security review of the deal as a preemptive move, saying they “didn’t want it to become a political football.” He expects the acquisition to be approved because Cirrus isn’t a high-tech aviations firm with national security-sensitive trade secrets.

China Aviation Industry Corp, known as AVIC, also manufactures a stealth jet fighter in China and has come under scrutiny before for bidding on U.S. defense contracts. It is currently working with U.S. Aerospace Ltd., a California-based manufacturer, to develop a fleet of helicopters used by the president.

Last November, the foreign investment committee blocked a $2 million acquisition of a small U.S. technology start-up by Chinese telecommunications firm Huawei Technologies Co., one of just a handful of China-U.S. deals struck down in recent years.

In 2007, the committee came under attack for clearing the sale of six U.S. commercial ports to a Dubai-based firm. Lawmakers have since pushed for greater transparency and congressional oversight in the review process.

AVIC’s move to buy Cirrus comes amid a surge of dealmaking between U.S. small- and midsized businesses and cash-rich Chinese companies – a trend we covered last week.

Cirrus employs about 400 workers in Duluth, along with a team of 70 workers at a second production facility in Grand Forks, North Dakota, and about 30 sales officials.

Wouters says the deal will help the company expand in the global market while creating jobs at home. He describes the deal as the “next chapter on a global stage.”

In a joint statement, China Aviation Industry General Aircraft President Meng Xiangkai said the company was committed to creating “job opportunities in Duluth and Grand Forks.”

Rep. Chip Cravaack (R., Minn.) told Minnesota public radio last week that he plans to meet with Cirrus executives and the director of the U.S.-China Economic and Security Review Commission to ensure aviation jobs stay in Minnesota.

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