ChinaFDI

REVIEW & OUTLOOK (Editorial)

China Paranoia

394 words
4 August 2005
The Asian Wall Street Journal
A7
English
(c) 2005 Dow Jones & Company, Inc. To see the edition in which this article appeared, click here http://awsj.com.hk/factiva-ns

The Red-scare protectionists in the U.S. Congress won a victory of sorts this week when the Chinese-owned oil company, Cnooc Ltd., withdrew its offer to purchase Unocal for $18.4 billion. But at whose expense? We suspect the big losers are not so much the Chinese but rather Unocal shareholders, who will have to take a lower price for their shares.

Cnooc's offer was about $1 billion higher than what American-owned Chevron Corp. has put on the table. Had it not been for six weeks of congressional jaw-boning against the Cnooc offer, there's a strong likelihood a bidding war with Chevron might have prompted Cnooc to raise the price further.

This awkward affair follows on the Bush Administration's misguided demands that China revalue the yuan and the tariff measures directed at Chinese imports introduced in both Houses of Congress. So we now have a fissure in U.S.-China relations at a time when $250 billion a year in two-way trade flows are unambiguously enriching both nations.

The mystery is why there is a Washington celebration over Cnooc's stand-down. To be sure, China is a nation with inexcusably suppressed political freedom and way too much state intrusion in the economy. We too were troubled that Cnooc is quasi-state owned. But it is a good thing for Americans if the Chinese use their increasing economic clout and the dollars they accumulate from trade to bid up the value of U.S. assets.

And since there is one global price for oil, whether Unocal's resources are owned by a Chinese or American firm has no bearing on the price Americans pay for gas. China, like the U.S., is a major importer of oil; Cnooc would have had every incentive to pump oil to keep it on the market.

A zero-sum neurosis has taken hold on Capitol Hill that the Chinese, with their double-digit rates of economic growth, are creating too much wealth and that all this wealth is coming at America's expense. The real lesson of China's economic miracle of the past decade is that capitalism works. The lesson of the failed Cnooc deal with Unocal is that there are still too many mercantilists in Washington.

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