Gary Becker makes the case that Chinese ownership of U.S. firms is not a national security concern. He focuses on CNOOC's failed bid for Unocal, and his argument boils down to this: (1) don't worry about Chinese ownership of oil reserves because the market for oil is global, and even if China decided to consume all of Unocal's production, the U.S. could purchase oil from other countries (or, in a dire emergency, take back the U.S. reserves); and (2) CNOOC probably bid too much for Unocal, and other Chinese companies subsidized by their government's largesse are likely to overpay for American assets, thus transferring wealth from China to the U.S.
Richard Posner agrees with Becker, noting that Unocal's U.S. oil reserves act as "hostages against China's using its control of Unocal to impede U.S. access to oil."
All of this makes sense to me. During my course in Lund, we discussed this deal, and I quoted T. Boone Pickens, who said, "This is clearly up to the shareholders of Unocal. They own the company. It's not for some politician to step in. There's not that much involved in it. It's a peanuts deal in a global sense." Although I can imagine a circumstance in which Chinese ownership of a U.S. firm would be problematic, CNOOC's bid for Unocal was not that deal.
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1. Posted by Frank Martin on August 8, 2005 @ 17:30 | Permalink
I agree that its really up to the shareholders, but you can understand that when one of the Chinese Generals chooses this critical time in contract negotiation to announce how hes going to "nuke los angeles", that it might just cause the shareholders to reflect more than they usually do on the nature of profit and how it doesnt help to have any if you need to spend it all to get a fashionable lead lined jacket on rodeo drive.
2. Posted by Roaring Tiger on August 8, 2005 @ 18:23 | Permalink
In response to Frank, I'd say, "Perhaps." Folks didn't get squidgy when Saudi Aramco formed a partnership with Texaco or Lukoil purchased Getty's 1300 gas stations
(see http://bigcatchronicles.blogharbor.com/blog/Energy/Unocalacquisition/_archives/2005/7/1/989040.html
While I think there are some issues to consider with China, I think a large dollop of xenophobic hysteria went into the opposition too.
3. Posted by Antony Page on August 9, 2005 @ 10:41 | Permalink
I agree with Becker regarding national security (and made similar arguments in an op-ed piece at http://www.baltimoresun.com/news/opinion/oped/bal-op.china27jul27,1,1317867.story).
The issue of opening up Chinese markets, however, is more complex than Becker suggests. If blocking a Unocal sale leads more quickly to an open Chinese market, both China and the U.S. would then be better off. (Of course, one could still argue that the U.S. has better tools to pressure China than depriving Unocal S/Hs of an ownership premium.)
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