Chinese investors faced more scrutiny from U.S. national security watchdog than any other

WASHINGTON (Reuters) - Chinese investors faced more scrutiny from a U.S. national security watchdog than those from any other country in 2013, the Obama administration said on Thursday in a report.

The report could add to tensions between Washington and Beijing as they negotiate a bilateral investment treaty.

China's companies feel they are singled out by Washington, which counters it doesn't discriminate against any country and the increase in reviews of Chinese investors reflects higher investment flows from them.

Data from the Committee on Foreign Investment in the United States (CFIUS) showed the secretive body in 2013 reviewed 21 investments proposed by Chinese firms or individuals.

That represented about a fifth of the 97 transactions that were reviewed because a foreign company was seeking an ownership interest in an industry that might be sensitive to U.S. national security.

In 2013, China topped the list of covered transactions for the second straight year. Japan was next with 18 transactions, followed by Canada with 12.

Some of China's most high-profile U.S. investments have hit snags with CFIUS in recent years. China's Anbang Insurance Group Co recently received a go-ahead to buy New York's famed Waldorf Astoria Hotel from Hilton Worldwide Holdings.

A China-U.S. investment treaty could boost the still relatively paltry levels of direct investment between the two countries, and Washington expects Beijing will raise concerns over CFIUS scrutiny around their treaty talks.

Most reviews arise from voluntary notices filed by companies, though CFIUS has the power to start its own investigations and companies often feel compelled to initiate the process.

In China, CFIUS review is the "most talked about issue"regarding an investment treaty with America, said Fang Jin, the deputy secretary general of the China Development Research Center, a leading Chinese government institute. "Chinese companies represent a disproportionately high percentage of cases covered by CFIUS," Fang said at an conference in Washington earlier this month.

That appeared to be the case in 2013, although U.S. data might exaggerate this. Commerce Department figures show China accounted for just under 1 percent of U.S. bound FDI in 2013.

However, private estimates that include investments made through third countries like Singapore suggest China's share of new FDI might be several times higher.

A senior Treasury official, which is the lead department among the government agencies that are part of CFIUS, said the total number of transactions covered by CFIUS in 2014 was probably above 140.

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