Last month, Obama blocked Ralls Corp.'s plan to build four wind farms near a U.S. Navy base, after the Committee on Foreign Investment in the United States concluded it posed security risks. It was the first time a U.S. president stepped in to halt such a foreign business deal for national security reasons since 1990, when President George H.W. Bush scuttled the sale of a manufacturer to a Chinese agency.
Chinese construction machinery giant Sany denied that the project posed security risks and said U.S. officials were discriminating against the company because it was Chinese. It filed a lawsuit against the U.S. government last month and added Obama's name as a defendant later. U.S. officials have said the case has no merit and that they will "vigorously" defend against it.
CEO of affiliated company Ralls Corp., Wu Jialiang, said at a Beijing news conference Thursday that contained warnings that China's government could retaliate against American companies that Sany "would never do anything that threatens U.S. national security."
Sany said that Ralls purchased the Butter Creek wind farm project from a Greek electricity grid company with the development already approved and permits in hand.
Xiang Wenbo, a Sany director, said the company had agreed to transfer, relocate or remove the wind turbines after objections were raised, but they hadn't been allowed to. He said U.S. authorities had reached unfair conclusions, seized their property and assets and aren't to be reasoned with, likening their behaviour to that of "thugs."
The case has handed Obama the opportunity to appear tough on Chinese interests during an U.S. election campaign in which both the president and his Republican challenger Mitt Romney have invoked China as a villain in their arguments about revitalizing the U.S. economy. Both have accused the other of policies that send jobs to China.
In a televised presidential debate Wednesday, Romney said he would label China a currency manipulator "on day one." Obama said he had saved 1,000 jobs by slapping levies on low-priced Chinese-made tires.
"In the U.S. you always treat our country as a hostile country and you believe whatever move we take undermines U.S. national security," said Xiang. This bemuses Chinese, who have "extremely favourable" impressions toward the United States and many of whom want to study and migrate there, he said, adding it was his dream to send his son to an American university.
Chinese investment in the United States is small but growing and reached $22.6 billion this year, according to Rhodium Group, a research firm in New York City. Most proposed Chinese investments in the United States go through with little trouble. But Chinese companies see the U.S. market as increasingly difficult due to security reviews and other regulatory hurdles.
To consternation in China, a U.S. governmental report last week said Chinese telecom equipment suppliers Huawei Technologies Inc. and ZTE Corp. are potential security threats and recommended regulators block them from buying U.S. companies.
"I don't know really what signal President Obama and his administration wish to give to investors around the world," said Mei Xinyu, of the Ministry of Commerce's Institute of International Trade and Cooperation, who spoke at the news conference. "Maybe the signal is 'Come and invest in the U.S. and then you will end up pantless and penniless.'"
The news conference panel, which included lawyers and academics, warned that the Chinese government may be prompted to fight back by targeting U.S. companies operating on its shores.
"If the Chinese government chooses to intervene and retaliate on behalf of this company, for example by taking measures on national security grounds against companies like Apple and Cisco, then perhaps this will endanger the possibility of President Obama's reelection," said Zhang Guoqing, a political scientist at Chinese Academy of Social Sciences' American Studies Institute.
"If the United States loses the Chinese market, then it will become their biggest mistake in history," he said.
Zhang suggested the Chinese government and companies could exercise influence in the United States by putting pressure on large American companies operating in China to lobby Washington.
"In recent years, the Chinese government has exerted pressure on Boeing, and Boeing in turn returned to the U.S. to lobby Congress," he said.
Sany alleges that the U.S. investment committee and Obama have exceeded their authority and deprived Sany of its private property rights without legal procedures. It also says that U.S. officials provided no evidence to show the project threatened American national security and that they emphasized the Chinese character of Sany Group and its Ralls Corp.'s shareholders, violating "the equal rights protected by the Constitution."
Ralls CEO Wu said the company had incurred $20 million in direct losses.
"Although a relatively small case, it connects to the fundamental faith of Chinese investors who are looking forward to investing in the U.S. as well as millions of entrepreneurs all over the world," Wu said. "I firmly believe to mishandle this delicate matter will cause the U.S. thousands of lost job opportunities."
"At the same time we have full faith in winning this lawsuit," he added.
Follow Louise Watt on Twitter at http://twitter.com/louise_wattSuggest a correction