Huawei hullabaloo hides Chinese minnows At about the same time that a US congressional committee ruled that Huawei and ZTE, the Chinese telecommunications companies, posed a threat to national security, the state of Wisconsin was rolling out the red carpet for Chinese investors of a different breed. If Huawei and ZTE represent the whales of Chinese industry, the investors in Wisconsin were the minnows, a caravan of 50 entrepreneurs who had struck it rich in fields from property to mining and were now thinking of putting some cash to work in the US. They were looking at a range of companies which, should deals be struck, are unlikely to trigger security concerns in Washington. Potential targets included Eric Buell Racing, a high-performance motorcycle maker, and AquaMost, a water treatment technology developer. It is perfectly understandable that the fireworks over Huawei should attract more public attention. But they also serve to distract from the bigger trend, the one that was occurring in Wisconsin and off the international media's radar: through a patchwork of smaller deals, Chinese outbound investment in the US and Europe is soaring, and is often being welcomed with open arms. The boom seems to be only beginning. Chinese direct investment in the US before 2009 totalled about 30 deals a year, worth less than $500m overall. Over the past two years that has mushroomed to an annual average of 100 deals, worth about $5bn, according to Rhodium Group, an economic consultancy. In Europe, it calculates that Chinese direct investment rose from less than $1bn a year for most of the past decade to about $10bn last year. The biggest deals are coming from the whales of Chinese industry, which are typically state-owned. But the vast majority of the deals - about two of every three - are from the minnows. Foreign reactions to the whales and the minnows could hardly be more different, and it is not just about the size of their investments. For all the talk about China Inc as a monolithic entity, governments around the world are increasingly distinguishing between Chinese companies. Truly private players are pushing at open doors as they expand abroad, whereas state-backed companies are encountering far greater hostility. State-owned enterprises have completed some mammoth overseas deals recently, such as the $3.5bn investment by China Three Gorges in Portuguese utility EDP and Sinopec's $2.2bn investment in Devon Energy of the US. Yet there is less than meets the eye to these mega deals. They are almost always for minority stakes - in effect, they are little more than financial investments. Chinese state-owned enterprises seem to have wisely judged that majority bids might not gain approval, but minority stakes do not yield the same kind of benefits that outright acquisitions can when executed well. Huawei's troubles are illustrative of the pitfalls for any company that is seen as linked to the state. The congressional intelligence committee's conclusion that it serves the Chinese military could effectively bar Huawei from making any substantial investments in the US. Huawei protests that it is a private company that only happens to be founded by a former officer in the People's Liberation Army, but it refuses to fully divulge its ownership structure. There are good reasons to believe that Cnooc, China's state-owned offshore oil company, will be successful in its $15bn bid for Canada's Nexen. Yet it is hard to imagine Cnooc being able to gobble up a company much bigger than that - Nexen controls less than 5 per cent of Canada's oil sands leases. By contrast, private Chinese companies are having a much easier time of it. Small acquisitions that come below thresholds for national security reviews are of course relatively straightforward, but even larger deals, such as Sany's $475m acquisition of German pumpmaker Putzmeister, are going through. Thomas Luedi, a director with the McKinsey consultancy in Shanghai, says that Chinese companies have learnt how to structure deals to allay concerns - pledging, for example, not to fire workers. "The Chinese have shown in many deals that, by and large, it wasn't the end of the day after they took it over," he said. The company wasn't destroyed. Corporate governance didn't go anywhere. Huawei can make similar pledges, but the whiff of the state in its background overwhelms its words. Thankfully for China, it has thousands of other companies without similar baggage - and these are the ones that are leading its march into the US and Europe. Simon Rabinovitch is the Financial Times" Beijing correspondent