A bold offer by a state-owned company here to outbid Chevron and take over a major California oil group suggests that China's rising economic clout has hit harder and faster than even many optimists predicted.
The $18 to $20 billion offer by China National Offshore Oil Corp. (CNOOC) to secure Unocal, which has oil and gas reserves in Asia, underscores the magnitude of the energy needs of China as it continues its manufacturing juggernaut on the world stage. The bid is part of China's so-called energy diplomacy, which in recent years has witnessed a host of Chinese leaders, including President Hu Jintao and Premier Wen Jiabao, making deals worth tens of billions in Australia, Sudan, Iran, Khazakhstan, Venezuela, and Canada.
Yet as the scale of China's push into world markets gets larger, including its willingness to accept far greater risk and exposure than before, there may be a shakeout in the US over how the principle ple of free markets meshes with regulation and political sentiments. This is especially true in the case of huge state-run Chinese corporations that operate with less transparency than do Western corporations, for the most part.
"If this gets to the next step - [Congress] may not allow it," former Sen. Bob Kerrey of Nebraska told reporters in Beijing Thursday, regarding the CNOOC (pronounced sea-nook) offer. "In principle, you aren't against CNOOC taking over. But it is a government corporate entity. As an American citizen, I would want increased transparency about ownership. I want to know who owns this company... [transparency] is also good for China," said Mr. Kerrey, who was in town to start an institute dealing with citizen diplomacy in Asia.
The current season of economics between China and the US is one of increasing investment as well as political friction.
The CNOOC bid comes less than a week after the Bank of America announced it would acquire 9 percent, or $3 billion, of China Construction Bank. Last year China's leading computer giant Lenovo bought the IBM laptop computer division, and a Chinese company, Haeir, is bidding to take over the struggling US appliance behemoth Maytag.
Yet both Congress and the White House are asking that China revalue its currency, which has been artificially held at roughly 8.2 yuan to the dollar for many years.
Perhaps a larger long-term clash, economists are beginning to say, is over China's ever- widening trade imbalance. Since China joined the World Trade Organization in 2001, and as China has sought to have the quotas imposed by other states removed, there has been an assumption that China's exports and imports would begin to balance out. As China's cheap-labor factories produced low-cost goods for export, Chinese economists had predicted that earnings would be spent on imports that offset the giant trade deficits.
Yet this prediction has not quite proved true. China was importing considerable amounts of foreign goods, parts, and high-tech machinery until a year or two ago.
But recent figures suggest that, particularly in Southeast Asia, China itself has been producing the goods it once imported - thus widening the deficits and creating concern in the region.
Trade ministers from Malaysia, Thailand, the Philippines, Indonesia, and Cambodia have all stated that Chinese imports of their products are at risk.
The recent trade row with Europe and the US over textiles also brought the issue home to local industries that have been seriously affected.
CNOOC is China's third-largest energy firm, and its bid is the largest attempt ever by a Chinese company to gain an overseas corporate foothold.
The merger would give China a major Asian energy plum, and increase CNOOC's reserves 80 percent.
The corporate announcement of the bid late in the evening here Wednesday included comment about a friendly merger and one that would not harm US energy supplies or costs. The company issued statements saying that unlike Chevron, which has suggested it may cut costs by conducting mass layoffs, CNOOC would retain all employees.
Chevron officials say they had nearly completed their deal, about $2 billion less than the CNOOC offer. After the new bid, Chevron officials told Reuters that they wanted to finish their deal by the end of August. The move appeared to offset the larger offer with a promise of speedy return in comparison with a bid that might wind up in a complicated and lengthy legal and political morass.
The amount CNOOC must borrow to cover its end of a merger is unknown, but is thought to be substantial.
China is the world's No. 2 consumer of energy, and has been working hard to secure permanent, stable supplies. Andrew Xie at Morgan Stanley in Hong Kong argues that China has solved some of its short-term energy problems, and its position is better this summer and next year.
There has been a slight cooling of the economy, and measures taken over the past two years, such as the increased mining of coal, are making up a shortfall in the electricity sector.