As we reported last week (See Will Your Next Company Owner Be China or Russia?), there is increasing concern over foreign investment in, and potential ownership of, US companies by “sovereign funds,” or government-owned investment vehicles of many developing nations with fat coffers from rising oil and commodity prices.

That concern extends as well to investments by Chinese corporations in US enterprises, especially since the Chinese government generally owns major stakes in most of the enterprises.

The most recent example: Chinese high tech company Huawei Technologies pulling out from a deal in which it was a partner with Bain Capital to buy US-based 3COM, a maker of networking equipment. The deal was held up in part by reviews by US agencies regarding potential “security concerns” – but most believe the growing objection to Chinese investment here was the real driver.

Officially, Huawei said that it decided to abandon the deal for reasons ranging from “complexity of the approval process,” to a fall in the stock market.

Behind the scenes, however, Chinese government officials are steaming over the growing US resistance to investment here by Chinese companies.

For example, Huawei’s marketing officer this week dismissed the US security concerns as “bull—.”

This came after the Chinese government appealed to Washington for "fair and legal" treatment of the potential partnership of Huawei in the 3COM deal.

"We hope relevant US management departments can deal with this issue fairly and in accordance with the law, to create a fair and favourable environment for Chinese companies in the US," said Liu Jianchao, Chinese foreign ministry spokesman.

While relatively restrained by Chinese diplomatic standards, Liu's comments highlighted a sense widespread among Beijing officials that the US was using national security concerns to justify protectionism.

We predict we are at the early stages of this debate.