Fwd: +Red China is Unhappy+
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Wed Jul 6 19:55:03 MDT 2005
China Tells Congress To Back Off
Tensions Heightened by Bid to Purchase Unocal
By Peter S. Goodman
Washington Post Foreign Service
Tuesday, July 5, 2005; A01
SHANGHAI, July 4 -- The Chinese government on Monday sharply
criticized the United States for threatening to erect barriers
aimed at preventing the attempted takeover of the American oil
company Unocal Corp. by one of China's three largest energy firms,
Four days after the House of Representatives overwhelmingly
approved a resolution urging the Bush administration to block the
proposed transaction as a threat to national security, China's
Foreign Ministry excoriated Congress for injecting politics into
what it characterized as a standard business matter.
"We demand that the U.S. Congress correct its mistaken ways of
politicizing economic and trade issues and stop interfering in the
normal commercial exchanges between enterprises of the two
countries," the Foreign Ministry said in a written statement.
"CNOOC's bid to take over the U.S. Unocal company is a normal
commercial activity between enterprises and should not fall victim
to political interference. The development of economic and trade
cooperation between China and the United States conforms to the
interests of both sides."
Those words, the latest rhetorical volley in an escalating trade
battle, officially elevated the takeover battle for Unocal into a
bilateral issue involving Washington and Beijing, raising the
stakes of the outcome.
CNOOC's bid comes as China's emerging force in the global economy
continues to sow international tensions over competition for
natural resources, impacts on the environment, trade balances and
security relationships. The deal would be the latest in a string
of Chinese purchases of foreign companies as Beijing encourages
domestic firms to seek new markets abroad and secure raw materials
for China's aggressive industrialization. The Chinese government
has urged energy companies in particular to buy foreign oil fields
as China's consumption soars, deepening worries about the
country's access to supplies.
Already, CNOOC's bid has taken China across a new threshold: It
has unleashed the first takeover battle between a Chinese company
and a U.S. firm, the oil giant Chevron Corp., which has its own
deal to buy Unocal, for $16.5 billion. If completed, CNOOC's
purchase -- its bid is for $18.5 billion -- would be the largest
foreign takeover ever made by a Chinese firm.
But as the price of oil continues to soar, underscoring the finite
supply of global stocks, some members of Congress portray China's
appetite for energy as a threat to U.S. interests. They are
painting CNOOC's effort to buy Unocal as an attempt to siphon off
oil that would otherwise land in the United States, a proposition
that analysts call dubious because most of Unocal's outstanding
contracts supply customers in Asia.
As the House adopted its resolution Thursday by a 398 to 15 vote,
some noted that CNOOC remains under the majority control of the
Communist Party-led state, suggesting that this alone made the
deal a threat.
"We cannot, in my opinion, afford to have a major U.S. energy
supplier controlled by the Communist Chinese," said Rep. William
J. Jefferson, a Louisiana Democrat. Monday's reply from Beijing
reinforced what CNOOC has said from the beginning -- that the deal
is nothing more than an attempt to expand its business
opportunities and invest capital sensibly.
Long before CNOOC emerged with its unsolicited offer for Unocal,
the United States-China relationship was already highly complex.
There has been friction in recent months over China's roughly $160
billion trade surplus with the United States and surges this year
in Chinese-made textiles reaching U.S. shores. Some U.S. trade
groups accuse China of manipulating its currency, the yuan, to
keep it artificially low, making Chinese goods unfairly cheap on
world markets. The Bush administration has pressured China to
allow its currency to float freely. China argues that it is being
made a scapegoat for the decline of U.S. manufacturing.
Tensions also have grown over North Korea's pursuit of nuclear
weapons. In Washington, some suggest that China is not doing
enough to pressure North Korea, its longtime ally, to return to
stalled talks, while propping up the regime in Pyongyang with food
and fuel. Chinese officials have criticized the United States for
demonizing North Korea and undermining the possibility of
Taiwan is always a hot button. China claims the self-governing
island as part of its territory and threatens to reclaim it by
force if Taiwan's government moves toward declaring its
independence. The United States is nominally pledged to come to
Taiwan's aid in event of war.
The battle over Unocal has injected yet another factor into this
already volatile relationship ahead of a planned visit to
Washington by Chinese President Hu Jintao this fall.
But analysts say the issue has thus far produced little that could
alter the relationship between the two governments, because
Beijing has grown sophisticated at distinguishing between rhetoric
from Capitol Hill -- where Thursday's resolution was nonbinding --
and policy from the White House, which has said little on the
But whatever comes of the Unocal battle, tensions over Chinese
investment are probably only beginning. Just as a rising Japan in
the 1980s snapped up high-profile assets in the United States and
provoked widespread American unease, China's expanding horizons
are having a similar effect.
Moreover, key differences between Japan of that era and
current-day China could make this go-round more combustible: Japan
was a U.S. military ally and part of the same ideological bloc,
whereas China is viewed by many in Washington as an adversary.
But the simplest reason for tension may be the amount of cash at
China's disposal: As investment pours in and China's central bank
buys dollars to maintain the value of its currency, the country
has amassed $650 billion in foreign exchange reserves. China has
plowed much of that money into U.S. Treasury bonds.
But the quest for Unocal and other foreign companies is being
construed by some as a sign of diversification.
"We invest too much in U.S. federal bonds, and they don't make us
much money," said Pan Rui, a professor at the Center for American
Studies at Fudan University in Shanghai. "Now we're learning to
invest more wisely, to try to invest in American companies and
© 2005 The Washington Post Company
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