Earlier this summer, the China National Offshore Oil Corporation, known as CNOOC, made a cash offer of $18.5 billion to buy Unocal. It was a friendly offer, and since 70 percent of Unocal’s reserves are near Asian markets where CNOOC operates, it seemed to make sense to the company, which is owned by the Chinese government.
But Chevron stepped in with a two-pronged attack to stop the deal. First, it made its own offer of $17 billion in cash and stock. And second, according to The Wall Street Journal, it began a fierce lobbying campaign in Congress.
One of the reasons for the concern was China’s obvious economic clout — they are swimming in cash. Americans are also concerned that the Chinese want to take American oil back to China to fuel its booming growth. According to another report in The Wall Street Journal, many people believe that what China really wanted from Unocal was access to the vast oil reserves that lie in the deepest waters off the Gulf of Mexico — up to 15 billion barrels of it — as well as Unocal’s technology and know-how for getting at it.
Other concerns have been raised as well. The transformation of China in recent years into a capitalist giant in Communist clothing — or vice versa — makes it a threat in the eyes of some people. Moreover, CNOOC is a state enterprise with a mandate to increase China’s energy security. It and other Chinese oil companies have been aggressively attempting to snap up oil and gas reserves around the world.
Many people argued that these concerns alone should have been enough to stop the Unocal deal. Others raised worries about inadequate disclosure and transparency by the traditionally ultra-secretive Chinese as they attempted to get approval from Western shareholders and regulators.
In a similar case, the Chinese company, Haier, had bid on the American firm, Maytag.
Considering these and other Chinese acquisition possibilities, the debates take on new dimensions as Westerners increasingly fear “a grand economic Chinese takeover.”
To put this trend in context, it’s helpful to remember when Japan began buying up U.S. businesses and real estate in the 1980s, which inspired a similar reaction. That anxiety ended when Japan’s economy tanked — and as we’ll see in Trend #5, China’s ...
