Unocal bid won't slow China's shopping spree

Trade imbalances
China’s rapid growth has also created a huge trade imbalance with the U.S., and America’s appetite for cheap Chinese-made goods shows no signs of slowing. The growing surplus of dollars American consumers send to China to buy all those goods is piling up. So far, China has recycled most of that money by buying some $700 billion in U.S. Treasuries, helping to keep U.S. interest rates low.

Now, China is beginning to use those surplus dollars to try to buy up hard assets like U.S. companies. U.S. firms aren't the only ones on China’s shopping list. Chinese consumer electronics maker TCL last year bought a piece of France’s Thomson electronics in 2004 and recently bought out Alcatel’s stake in a joint-venture phone business, for example.

And the tightening of economic ties between China and the U.S. has not been a one-way street -- U.S. and other global multinationals have been buying stake in Chinese companies for at least the past decade. Last year, Anheuser Busch paid $700 million to buy Chinese brewer Harbin after its 2002 purchase of a 27 percent stake in China’s largest brewer Tsingtao. U.S. photo giant Kodak paid $100 million for a 20 percent stake in China’s Lucky Film Corp.

But opponents of China’s Unocal bid, led by rival bidder Chevron Corp., successful argued before Congress that it wasn’t a fair fight because China was subsidizing the bid with low-interest loans. They also argued that China’s state-managed economy unfairly restricts foreign investment in Chinese firms.

‘If China were open to American companies buying Chinese companies, I think CNOOC would have had a much easier time of it.’ — Sen. Charles Schumer Dem., New York

“China likely wouldn't allow an American company to buy a similarly situated Chinese company,” said Sen. Charles Schumer, D-N.Y., after the announcement that CNOOC had dropped its bid for Unocal. Though he said he saw nothing wrong with the deal, “If China were open to American companies buying Chinese companies, I think CNOOC would have had a much easier time of it."

Even if China faces future opposition to buying up American resources, it is busy shopping elsewhere in the world.  Last November, Chinese President Hu Jintao told the Brazilian Congress that China would invest $100 billion across the region within a decade and signed 39 commercial deals for Chilean copper, Argentine beef and Cuban nickel.

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