From Editor Mark Lacter’s Commentary in the Aug. 8 Los Angeles Business Journal:
Too bad the Chinese weren’t willing to offer $20 billion for Unocal Corp.
Too bad they wouldn’t fork over $25 billion or $30 billion,in short, whatever it took to snag the El Segundo-based oil company from Chevron Corp. Had CNOOC Ltd. outbid Chevron by a large enough figure, Unocal’s board would be hard-pressed to say no,not with shareholders counting every last penny.
It also would have been fun to watch those Washington hard-liners sidestep free enterprise in favor of their red-baiting nonsense about turning over Unocal’s assets to the Chinese.
Let’s get this straight, we believe in the marketplace making its own decisions,just as long as it doesn’t interfere with our nutty Communist conspiracy theories. Here’s how Republican Congressman Gary Miller from Diamond Bar put it on our Op-Ed pages a few weeks ago: “We must recognize this proposed acquisition for the thinly veiled politically motivated scheme that it is and respond by protecting our vital domestic energy supplies from the threat of foreign usurpers.” Yikes.
In the end, CNOOC apparently accepted its own fiduciary responsibility, recognizing that shelling out any more than $18.5 billion,its final offer,was not only perilous, given the debatable value of Unocal reserves, but unlikely to pass regulatory and congressional muster amid a blast of hawkish rhetoric. They did the right thing by dropping out.
So now what? Well, CNOOC will continue to pursue other energy companies around the world because, quite simply, it needs the reserves and it has lots of money to work with. Other Chinese companies will be seeking acquisitions of their own. The question is whether any of their targets will be American.
For now, that’s unlikely. There’s just too much heat emanating from the Unocal deal, even for acquisitions that have virtually no security considerations (as if that were a legitimate sticking point with Unocal).
Already, the U.S. government is quietly discouraging the Chinese from doing deals, according to the Los Angeles Times. Rep. Donald Manzillo, the Republican chairman of the House Small Business Committee who really spearheaded opposition to CNOOC’s purchase of Unocal, has tried to link economic security with national security,and you know where that leads.
It galls Manzillo, Miller and the other red-baiters that China has become an economic colossus that the U.S. has become dependent on,even as it takes away our jobs and businesses. This is not a frivolous concern: In the first half of the year, China’s economy grew by 9.5%, exceeding continued expectations that growth would inevitably slow down. And there’s also no denying that the government-run banking system has had a critical hand in fueling much of this growth.
Yet is this cause enough to declare war, which is essentially what some in Congress have done this summer? Not according to much of U.S. business, which desperately needs Chinese labor, companies and money. That explains why the White House has kept its head low over the Unocal deal; vitriol is not the best foreign policy.
That’s also why the current firestorm is not likely to last. There are just too many reasons why doing business with the Chinese is a good thing and far too few indications that Beijing is planning anything nefarious,other than to make as much money as it possibly can. And what’s wrong with that?
