Should a Chinese Ant Take Over U.S. Money Transfer Giant?

by John Fund

Today the shareholders of MoneyGram, the second largest money-transfer company in the world, will vote on a $1.2 billion deal in which it would be acquired by Ant Financial of China. If it’s approved, expect the deal to become the focus of intense national-security debate. President Trump recently got Jack Ma, the head of China’s Alibaba retail giant, to pledge more investment in the U.S. But should Ant Financial, which is 15 percent owned by the Chinese government, be allowed to buy such an important base of the U.S.’s financial infrastructure?

Two Republican senators from Kansas, Pat Roberts and Jerry Moran, have written to Treasury Secretary Steve Mnuchin, warning the Ant acquisition raises privacy and security concerns.They are demanding an exhaustive review of the deal by the government’s intra-agency Committee on Foreign Investments in the U.S. Senator Roberts says the Chinese takeover of MoneyGram “should trigger no less concern than if a Chinese company were seeking to take control of a large, well-known bank.” He added that the deal “highlights the inequity between US and Chinese companies when it comes to international acquisitions . . . there is virtually no chance that a US financial services company would be permitted to acquire a Chinese [rival].” For his part, Senator Moran notes that Moneygram has many U.S. military personnel among its clients. Handing over access to their financial data to the Chinese could raise red flags in his view. Moran notes that the Chinese economy is highly non-transparent and we should assume that any “private” Chinese company has links to the Chinese government.

Of course, patriotism is often the last line of argument for trade protectionists. It’s no coincidence that Senators Roberts and Moran are raising the alarm. They represent Kansas-based Euronet, a competitor to Moneygram, that was beaten out by Ant Financial in a mid-March attempt to acquire Moneygram. Alex Holmes, chief executive of MoneyGram, told the Financial Times that any national-security concerns are spurious given the safeguards his company has in place. He says the U.S. cannot improve its balance of trade with China without deals such as the one with Ant. “The money transfer industry in China is open to foreign competition, and MoneyGram already has a robust business in China as do other money transfer companies,” Holmes told the FT. “Thanks to President Trump’s engagement with China, our two countries are on track to building an even stronger economic relationship. Investments in the US, like the one Ant will make in our company, are critical to creating new jobs and increasing economic growth in our country.”

All that is true, and the Trump administration is justifiably proud of its efforts to encourage Chinese job creation in the U.S. But caution is advised. As the Washington Times notes “the Chinese government has been caught in the past engaging in backdoor hacks of U.S. government computer systems, including those at the U.S. Office of Personnel Management and the Federal Deposit Insurance Corporation. It’s not exactly clear what they were looking for, but enabling ANT Financial to take over MoneyGram could enable it to search through the personal information and financial records of . . . U.S. military and law enforcement agencies.”

The Treasury-led investment review of the Moneygram deal should be both careful and fair. In the past, the U.S. has allowed most deals involving China. But there are exceptions. In 2009, the U.S. government blocked China from buying an American gold mine because of its proximity to a U.S. military base.

The proposed Moneygram acquisition raises other questions. GOP congressmen Robert Pittinger and Chris Smith, both key players in evaluating Chinese intentions from their committee perches, wrote an op-ed in the Wall Street Journal in which they noted financial experts have told Congress that Chinese investments in the U.S. financial sector are a part of a broader state-led strategic effort. He described those investments as “one piece of a much bigger and more complex strategic mosaic” that includes the goals of infiltrating key financial entities and “gaining control of western investment syndicates.

That means the acquisition of Moneygram and its 2.4 million U.S. customers cannot be viewed in isolation and must be looked at as part of an overall review of U.S. strategic and financial vulnerability in the years ahead. The shareholders of Moneygram who vote on the takeover of their company by Ant Financial today should be prepared for a lengthy security review and a decision that is predicated not just on investment flows but national-security concerns.

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