President Obama flexes on China

The Obama administration announced Friday that it would block an attempt by a Chinese-owned company to acquire four wind farm companies in the United States.

The Obama campaign is likely to use the decision to burnish Obama's credentials as a president who is "tough on China." 

Obama and GOP presidential candidate Mitt Romney have been fighting for weeks over who can better protect the U.S. economy and its workers from China's economic expansion.

Romney has run ads in the battleground state of Ohio saying he would be tougher on China, and said Obama has not done enough to push back against China's undervalued currency. But Obama has responded by saying those ads aren't credible, and has charged Romney with supporting the outsourcing of jobs to China. Obama has also reminded voters that he imposed tariffs on tires imported from China.

In this case, a Chinese-owned company called the Ralls Corporation sought to buy four wind farms in Oregon, and had already acquired an interest in these companies. However, foreign investment in U.S. companies is reviewable by the Committee on Foreign Investment in the United States (CFIUS), which is chaired by the Treasury Department.

And on Friday, Treasury indicated that CFIUS recommended a denial of the investment from China because the wind farms are all within or near restricted air space at a naval training facility in Oregon, a recommendation that Obama accepted. The Foreign Investment and National Security Act allows for overseas investment to be denied when possible security risks are presented.

Specifically, Section 721 of the law lets the president block investment when "he finds that there is credible evidence that the foreign interest exercising control might take action that threatens to impair national security," Treasury's statement said.

A Treasury official declined to offer details about the kind of complications that might arise from allowing a Chinese company to operate in or near restricted airspace.

"Due to the obvious sensitivity of national security considerations, I'm unable to go beyond what the statement says," this official told The Hill.

The decision is the third to go against China in the last few months, amid Republican charges that Obama is not being tough enough. Back in July, the Obama administration imposed tariffs on wind tower imports from China, and in June, the U.S. hit Chinese solar panels with a 31 percent tariff.

Disputes over investments by Chinese companies in U.S. firms have risen with China's economic growth.

In 2005, for example, the China National Offshore Oil Company (CNOOC) sought to buy California's Unocal, but that bid led to intense political pressure in Congress that ultimately led CNOOC to abandon its ambition.

Treasury's statement tried to walk a careful line by saying that while the decision to block the investment in the wind farms showed that Obama is concerned about national security, he also wants to maintain an open investment environment.

"The president's action demonstrates the administration's commitment to protecting national security while maintaining the United States' longstanding policy on open investment," Treasury said. "The president exercises his authority under section 721 with a focus on national security concerns and is committed to ensuring the fair and equitable treatment of all foreign investors.

"The administration will continue to ensure that the United States remains the most attractive place for businesses to locate, invest, grow, and create jobs. The president's decision is specific to this transaction and is not a precedent with regard to any other foreign direct investment from China or any other country."

But Ralls responded late Friday by arguing that there was no justification for Obama's decision, and warned that the company may pursue court action.

"The project poses no national security threat whatsoever, and the President's order offers no explanation otherwise," said Tim Xia, counsel for Ralls. "The President's order is without justification, as scores of other wind turbines already operate in the area where Ralls's project is located.

"The selective and arbitrary singling out of Ralls' project drives our effort to seek redress in U.S. courts."

— This story was updated at 3:39 p.m. and again at 4:44 p.m.