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Chinese firm's A123 buyout draws tech transfer fire on Capitol Hill

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Photo - In this Thursday, Aug. 6, 2009, file photo, an A123 Systems Inc. high power Nanophospate Lithium Ion Cell for Hybrid Electric Vehicles battery is displayed in Livonia, Mich. Bankrupt battery maker A123 Systems Inc. on Sunday, Dec. 9, 2012, said it will sell most of its assets to the U.S. arm of Chinese auto parts conglomerate Wanxiang Group Corp. for $256.6 million. Wanxiang America Corp. won an auction conducted under the supervision of the U.S. Bankruptcy Court for the District of Delaware. (AP Photo/Paul Sancya)
In this Thursday, Aug. 6, 2009, file photo, an A123 Systems Inc. high power Nanophospate Lithium Ion Cell for Hybrid Electric Vehicles battery is displayed in Livonia, Mich. Bankrupt battery maker A123 Systems Inc. on Sunday, Dec. 9, 2012, said it will sell most of its assets to the U.S. arm of Chinese auto parts conglomerate Wanxiang Group Corp. for $256.6 million. Wanxiang America Corp. won an auction conducted under the supervision of the U.S. Bankruptcy Court for the District of Delaware. (AP Photo/Paul Sancya)
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China's prospective purchase of what's left of the bankrupt A123 solar energy firm isn't being greeted with enthusiasm from the chairman of a House subcommittee on oversight and investigations.

"It is exceedingly frustrating to stand by and watch the fruits of our taxpayer-funded research and development (R&D) get shipped overseas to a Chinese firm," said Rep. Paul Broun in a statement issued earlier today. He is chairman of the oversight and investigations subcommittee of the House Committee on Science, Technology and Policy.

Based in Waltham, Massachusetts, A123 made batteries used by electric vehicles and had received a $249 million federal grant from the U.S. Department of Energy under President Obama's campaign to promote "green energy." The firm had spent about half of the grant before filing for bankruptcy on Oct. 15, 2012.

The bankrupt firm said Sunday that most of its assets are being bought by Chinese auto parts company Wanxiang America Corp. for $256.6 million.

Wanxiang America Corp. won an auction conducted under the supervision of the U.S. Bankruptcy Court for the District of Delaware.

A123's government business will be sold separately, for $2.25 million, to Navitas Systems, of Woodridge, Ill., according to AP.

The A123 bankruptcy was the latest in a string of business failures involving companies that have been recipients of the green energy fund, with the most prominent being the 2011 bankruptcy of Solyndra, a California-based solar energy panel maker that received more than $500 million in federal loan guarantees.

Broun said his subcommittee has been told by witnesses that "American R&D investments are commonly transferred to foreign nations. In this case, taxpayers provided $124 million to A123, and now China will ultimately manufacture and sell any technologies that may have been derived from this investment."

The Georgia Republican described the process as "a dirty cycle; we borrow money from China, use it to fund R&D in America, and then watch as the benefits of that research are reaped on foreign soil."

During a Dec. 5 hearing before Broun's panel, Dr. Robert Atkinson cited what he called "forced technology transfers" as a major factor in a decline in the longstanding U.S. edge in technological innovation.

"A growing number of nations rely on forced technology transfer where U.S. firms are pressured to transfer technology to the host country (by opening R&D labs, sharing proprietary secrets with domestic firms, or opening advanced production facilities) in exchange for being able to sell their products or services in the market. While many nations practice this, China is by far the most egregious actor when it comes to forced technology transfer,' Atkinson said in his testimony.

Atkinson, who is president of the Information Technology and Innovation Foundation, said a large majority of U.S. business executives claimed in a recent survey that they cannot do business in the world's second largest economy withou agreeing to transfer significant technology to Chinese partners.

Atkinson's testimony was mirrored by Daniel Shea, chairman of the U.S. China Economic and Security Review Commission.

"The Chinese companies that form these joint ventures often require their foreign partners to transfer technology to the joint venture entity established by the foreign and Chinese partners as a pre-condition for the establishment of the joint venture. Additionally, Chinese law requires government approval of foreign joint venture agreements."

Shea also noted that "the size and rapid growth of China's market makes it vital to many foreign businesses, especially as current consumer demand in the United States and Europe is weak ... to "often transfer technology or technological knowhow to their Chinese partners in expectation of contracts and market access."

You can read both men's testimony here.

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