Thursday, August 04, 2005
LexisNexis(TM) Academic - Document
The Straits Times (Singapore)
August 4, 2005 Thursday
SECTION: World
LENGTH: 755 words
HEADLINE: US firms fear retaliation after CNOOC's failed bid;
China could stop buying American, but fallout won't be great, some say
BYLINE: Eugene Low , US Correspondent
BODY:
WASHINGTON - AMERICAN companies doing business in China could face a backlash from Beijing following the failure of China National Overseas Oil Corp's bid to buy US oil firm Unocal.
There are fears here that the scuttling of CNOOC's bid on political grounds could cause Beijing to retaliate against US businesses.
A large number of US companies are either dependent on low-cost Chinese imports or have significant manufacturing operations in China.
Many, such as American high-tech firms and natural resource extraction companies, also depend on sales to the fast-growing Chinese market.
Exxon-Mobil chief executive Lee Raymond said in June that it would be a 'big mistake' if Congress interferred with the deal because it would hurt US companies seeking to do business in China.
Computer chip-maker Intel, for example, has 5,000 employees in China and has invested some US$1.3 billion (S$2.1 billion) there. China accounted for around 15 per cent of Intel's global sales of US$34 billion last year.
Boeing also sells a significant number of its aircraft to China. Earlier this year, the company won orders for 60 of its new 787 jets from Chinese airlines. It also uses about US$600 million in parts from Chinese firms.
Although CNOOC is 70 per cent owned by the Chinese government, it tried to characterise its US$18.5 billion offer for Unocal as a purely commercial transaction. Lawmakers in the United States, however, were not impressed.
Congress, citing national security concerns, was strongly against CNOOC's bid. A number of congressmen introduced legislation to block the deal.
CNOOC said on Tuesday that it was dropping its bid for Unocal. It attributed its decision to the staunch political opposition it faced in Washington.
The scrapping of the deal is likely to anger China, said Dr David Rothkopf, professor of international affairs at Columbia University. 'If we hit them hard, they can come back and stop buying Boeing aircraft to send a message,' he told the San Francisco Chronicle newspaper.
A recent deal to facilitate the sales of US software to China's government agencies could also be derailed.
But given the complex web of economic relationships linking China with the US, analysts said such retaliation is likely to be limited in duration and scope.
The economies of both countries are heavily inter-dependent. The US is a huge export market for Chinese goods, as well as one of China's largest foreign investors.
China also holds a sizeable amount of American debt - about US$230.4 billion worth of US Treasury notes. This gives China a stake in the US' prosperity.
'The last thing in the world that China wants is a recession in the US,' said Dr Rothkopf.
'They are the department store that is giving us a credit card so we can keep buying.'
Dr Donald Straszheim, chief executive of Straszheim Global Advisors, agreed. His firm offers consultations to companies doing business in China. He said:
'We expect China to retaliate in some small, veiled way. Any damage from this will be transitory and small.'
But while the short-term impact on American businesses could be limited, the failure of CNOOC's bid for Unocal could prompt Beijing to rely more on non-commercial means to secure energy resources overseas.
It might pursue a more aggressive policy of ensuring its own energy security by competing more directly for access to oil and gas assets around the world.
'We need to engage China through a rules-based system to encourage it to adopt a similar posture,' said Mr Albert Keidel, an analyst with the Carnegie Endowment for International Peace.
Democrat Representative James Moran of Virginia warned in Congress last month that blocking CNOOC's bid would only drive China to deal more with countries like Iran and Venezuela.
'If they don't buy American oil companies or Western oil companies, where are they going to go?' he said.
Encouraging Chinese investments in the US, on the other hand, would boost Si- no-US ties.
Said Cato Institute analyst Jerry Taylor: 'The more China invests here, the less likely we will be running into frictions down the road.'
eugene@sph.com.sg
Intel
Chip-maker Intel has 5,000 employees in China and has invested US$1.3 billion there.
China accounted for around 15 per cent of Intel's global sales of US$34 billion last year.
Boeing
Boeing, this year, won orders for 60 of its new 787 jets from Chinese airlines.
It also uses about US$600 million in parts from Chinese companies.
LOAD-DATE: August 3, 2005
August 4, 2005 Thursday
SECTION: World
LENGTH: 755 words
HEADLINE: US firms fear retaliation after CNOOC's failed bid;
China could stop buying American, but fallout won't be great, some say
BYLINE: Eugene Low , US Correspondent
BODY:
WASHINGTON - AMERICAN companies doing business in China could face a backlash from Beijing following the failure of China National Overseas Oil Corp's bid to buy US oil firm Unocal.
There are fears here that the scuttling of CNOOC's bid on political grounds could cause Beijing to retaliate against US businesses.
A large number of US companies are either dependent on low-cost Chinese imports or have significant manufacturing operations in China.
Many, such as American high-tech firms and natural resource extraction companies, also depend on sales to the fast-growing Chinese market.
Exxon-Mobil chief executive Lee Raymond said in June that it would be a 'big mistake' if Congress interferred with the deal because it would hurt US companies seeking to do business in China.
Computer chip-maker Intel, for example, has 5,000 employees in China and has invested some US$1.3 billion (S$2.1 billion) there. China accounted for around 15 per cent of Intel's global sales of US$34 billion last year.
Boeing also sells a significant number of its aircraft to China. Earlier this year, the company won orders for 60 of its new 787 jets from Chinese airlines. It also uses about US$600 million in parts from Chinese firms.
Although CNOOC is 70 per cent owned by the Chinese government, it tried to characterise its US$18.5 billion offer for Unocal as a purely commercial transaction. Lawmakers in the United States, however, were not impressed.
Congress, citing national security concerns, was strongly against CNOOC's bid. A number of congressmen introduced legislation to block the deal.
CNOOC said on Tuesday that it was dropping its bid for Unocal. It attributed its decision to the staunch political opposition it faced in Washington.
The scrapping of the deal is likely to anger China, said Dr David Rothkopf, professor of international affairs at Columbia University. 'If we hit them hard, they can come back and stop buying Boeing aircraft to send a message,' he told the San Francisco Chronicle newspaper.
A recent deal to facilitate the sales of US software to China's government agencies could also be derailed.
But given the complex web of economic relationships linking China with the US, analysts said such retaliation is likely to be limited in duration and scope.
The economies of both countries are heavily inter-dependent. The US is a huge export market for Chinese goods, as well as one of China's largest foreign investors.
China also holds a sizeable amount of American debt - about US$230.4 billion worth of US Treasury notes. This gives China a stake in the US' prosperity.
'The last thing in the world that China wants is a recession in the US,' said Dr Rothkopf.
'They are the department store that is giving us a credit card so we can keep buying.'
Dr Donald Straszheim, chief executive of Straszheim Global Advisors, agreed. His firm offers consultations to companies doing business in China. He said:
'We expect China to retaliate in some small, veiled way. Any damage from this will be transitory and small.'
But while the short-term impact on American businesses could be limited, the failure of CNOOC's bid for Unocal could prompt Beijing to rely more on non-commercial means to secure energy resources overseas.
It might pursue a more aggressive policy of ensuring its own energy security by competing more directly for access to oil and gas assets around the world.
'We need to engage China through a rules-based system to encourage it to adopt a similar posture,' said Mr Albert Keidel, an analyst with the Carnegie Endowment for International Peace.
Democrat Representative James Moran of Virginia warned in Congress last month that blocking CNOOC's bid would only drive China to deal more with countries like Iran and Venezuela.
'If they don't buy American oil companies or Western oil companies, where are they going to go?' he said.
Encouraging Chinese investments in the US, on the other hand, would boost Si- no-US ties.
Said Cato Institute analyst Jerry Taylor: 'The more China invests here, the less likely we will be running into frictions down the road.'
eugene@sph.com.sg
Intel
Chip-maker Intel has 5,000 employees in China and has invested US$1.3 billion there.
China accounted for around 15 per cent of Intel's global sales of US$34 billion last year.
Boeing
Boeing, this year, won orders for 60 of its new 787 jets from Chinese airlines.
It also uses about US$600 million in parts from Chinese companies.
LOAD-DATE: August 3, 2005
# posted by Eastlaw @ 3:55 AM 
