On Saturday CNOOC had asked the US Treasury to review the aquisition plan to get the regulatory process rolling. Chinadaily.com pointed out that the Treasury's Committee on Foreign Investments (CFIUS), has only barred one transaction out of the 1,500-odd it has examined since 1988.
The site also quoted Dong Tao, an analyst with CSFB in Hong Kong, "if Congress is saying that this bid will undermine national security, then they better watch out because the Chinese parliament could also come out and say the same thing about US banks buying up Chinese banks."
Chinadaily.com summed up the underlying fears of the dispute.
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 subject.The US is in a tricky position, caught between the principles of a free market economy and the fear that the Unocal deal will open the floodgates for more Chinese purchases. And they won't pick GM as their next target.
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 industries."
A rejection of the bid is likely to be met with protectionist measures by China and also undermines the rights of shareholders who so far could expect to be able to sell their shares to the highest bidder. The idea that the US government has to compensate them for the shortfall of 2 billion dollars is out of the way too. You cannot use taxpayer's funds to give it to shareholders. It's a catch-22.
Maybe they reread the IMF textbooks: An indebted country has to open its infrastructure to foreigners in order to attract capital.
See also previous posts "Free Markets - Yes, No...Or A Bit Pregnant?" and "Unocal: Central planning a la USSA - Oil no fungible asset anymore."