A proposal by China's Wanxiang Group to acquire 80-per cent stake in US automotive rechargeable battery maker A123 Systems has stirred a hornet's nest. Some Republican senators see the investment as another Chinese attempt to buy key US technology.

The proposed deal has drawn criticism from Republicans who say that the Obama administration has invested billions in taxpayer's money to aid green technology but the Chinese will reap the benefit.

Under a tentative deal announced this week, Wanxiang Group, led by Chinese billionaire Lu Guanqiu, has proposed to invest up to $450 million for an 80-per cent stake in cash-strapped A123, which has received a $249-million green-technology grant from the US government in 2009. (See: US battery maker A123 Systems to get $450-mn lifeline from China's Wanxiang).

Half of that grant has been used by the Waltham, Massachusetts-based company in building a manufacturing plant in Michigan, while the government extended the expiry date for the remaining untapped $120 million from end of 2012 to end-2014.

Soon after the proposed deal was announced, Republicans quickly raised concerns on sensitive US technology developed with the aid of taxpayer's money being handed over to the Chinese.

''This is just another example of Barack Obama's failure to follow through on his economic promises and the millions of taxpayer dollars he has wasted,'' said Kirsten Kukowski, a spokeswoman for the Republican National Committee. ''It's unfortunate Obama borrowed from the Chinese to give taxpayer money to prop up green energy companies that the Chinese are now buying already.''

The Republicans also say that the US government has done nothing to stop Chinese firms stealing US companies' technology.

Cliff Stearns, a Republican senator from Florida, told Bloomberg in an e-mailed statement, ''It appears the Department of Energy and the Obama administration have failed to secure sensitive taxpayer funded intellectual property from being transferred to a foreign adversary, which raises serious national security issues,''

''There is definitely a growing concern about foreign- controlled or owned companies attempting to gain a foothold into our supply chain in the US,'' Stearns said. ''We need to make sure the Federal government isn't an unwitting accomplice to the theft of our own national secrets by providing them with multimillion-dollar government grants and loans.''

Writing in a blog-post on Forbes.com, Bob Lutz, former vice chairman of Detroit-based carmaker General Motors, said superior battery chemistry, which was to be a US competitive advantage, is now theirs ……. but why are we surprised? The Chinese have all the money in the world, and if they ever called the loans they have given out to the US, the global economy would stop, and our nation would be in foreclosure.''

A123 is one of the US companies developing electric batteries to power the next generation of gas-free cars. But, after much hype and going public in 2009, the company, like others in the industry, has not lived up to its hyped-up image. Its stock price, once valued at over $20 a share, now stands at around 50 cents.

Founded in 2001 by Dr Yet-Ming Chiang, Dr Bart Riley and Ric Fulop, Waltham, Massachusetts-based A123's Nanophosphate technology is built on novel nanoscale materials, initially developed at the Massachusetts Institute of Technology.

The Nasdaq-listed company develops and manufactures advanced Nanophosphate lithium iron phosphate batteries and energy storage systems that deliver high power and energy density, long life, for the transportation, electric grid, commercial and government markets.

Its clients include German luxury carmaker BMW, China's SAIC and US electric carmaker Fisker Automotive. It is also expected to supply batteries for General Motors' upcoming Chevrolet Spark EV.

The company laid off 125 employees in December 2011 after Fisker reduced its purchase order of batteries following a recall from Fisker and five other clients over defective battery packs and modules that cost A123 around $55 million.

It reported a second-quarter loss of $82.9 million, on revenues of $17 million. A123 reported net loss of $55.4 million in 2011.

But, apart from the Republicans shouting hoarse on taxpayer's money going down the drain by the proposed Chinese deal, what really should be of concern to the lawmakers is that A123 is a US government supplier.

In addition to green batteries, A123 also makes energy storage devices for the electric grid and other commercial applications and supplies its Military 6T Battery to the US defence forces.

The Military 6T Battery is designed as a direct replacement for 6T lead acid batteries currently deployed in US military vehicles, The 6T Battery lasts longer, is about 50 per cent lighter than lead acid batteries, and is silent, which is crucial when operating communications, surveillance and other equipments.

The deal will be whetted by the US Committee on Foreign Investment (Cfius), which has a history of torpedoing Chinese deals.

Cfius, chaired by the secretary of the treasury, is an inter-agency committee of the US government that reviews national security implications of foreign investments in the US.

Cfius normally does not block a deal directly, but informs the US company to voluntarily drop a transaction if it finds that the transaction is not in the interest of national security.

It has indirectly blocked two Chinese deals and directly unwounded an already closed deal.

In December 2009, Cfius blocked plans by Northwest Nonferrous International Investment Corp, a subsidiary of China's largest aluminium producer Aluminum Corp of China, to acquire a 51 per cent stake in Firstgold for $26.5 million.

Cfius blocked the deal since Firstgold's four ore fields are located close to the Fallon Naval Air Station and other sensitive military assets. According to industry experts, the government also did not want the Chinese company to get hold of tungsten - a mineral used in the making of missiles.

It also blocked Chinese telecom gear maker Huawei Technologies' proposed acquisition of Marlborough, Massachusetts-based 3Com, a maker of equipment for computer networks in 2007, on grounds that the company's founder Ren Zhengfei, a former army officer, had close links with the Chinese intelligence and the PLA.