http://www.iht.com/articles/2005/06/26/opinion/edchina.php
The strength of China, the weakness of America
The New York Times
MONDAY, JUNE 27, 2005
If China's attempt to buy an American oil company does nothing else, it should,
at long last, force the United States to decide how it plans to protect its
economy, husband its resources and grow in a world where it is no longer the
only economic powerhouse.
With China on a buying binge for raw materials to feed its ever-expanding
economy, it was inevitable that it would eventually go beyond the more modest
corporate purchases it has already begun and make a grab for something the
United States really cares about. Last week, history's biggest Communist
country made the ultimate capitalist play: an $18.5 billion all-cash takeover
bid by the state-controlled China National Offshore Oil Corp., or CNOOC, for
the American oil company Unocal.
The bid landed with the impact of an unexploded missile in Washington, where
anti-China sentiment has been running high. From both sides of the aisle,
members of Congress sounded the alarm that China was threatening to gobble up
world energy resources. There is politics in that: Congress has an election
next year and gasoline prices are already high. But whatever happens to the
deal, Americans should be glad China reminded them that it is time to examine
America's economic strategy.
China's new power
The chairman and chief executive of the Chinese company, Fu Chengyu, insisted
that American national security was not an issue and called the unsolicited bid
friendly. "This transaction is purely a commercial transaction," he said.
That's a bit disingenuous considering that the money he is using is mostly from
the Chinese government and his company owes its first allegiance to Beijing
authorities, not world markets. And it raises the interesting question of
whether CNOOC can have it both ways: playing by Chinese rules at home while
taking advantage of American rules abroad to buy an American business. After
all, this is a government-owned company operating in an authoritarian state
that limits the ability of foreign companies to take their profits out of
China.
"Does anybody honestly believe that the Chinese would ever let an American
company take over a Chinese company?" asked Senator Charles Schumer, Democrat
of New York. Actually, they have, although on a scale that hardly raised
national security issues. Last year, Anheuser-Busch won a takeover battle for
the Harbin Brewery Group.
The CNOOC bid is of a much higher order and deserves examination above and
beyond the regulatory scrutiny normally given to corporate mergers and
acquisitions. But in some ways, the opposition to the CNOOC bid is the latest
installment in the anti-China fervor already gripping Washington. There are a
half-dozen proposals in Congress for across-the-board tariffs against Chinese
imports, spurred in part by American manufacturers who complain that China's
currency, the yuan, is undervalued, which results in cheaper Chinese goods
coming into America and hurting American jobs. This comes on top of moves by
the administration - urged on by Congress and a huge trade deficit - to
forcibly stem the importing of Chinese textiles this year.
Beating up on the Chinese is fine for sound bites to convince voters that
politicians care. But the real problem has less to do with China's current
strength than America's current weakness. A far more rational approach to
China's economic ascendancy would be to consider what steps the United States
should be taking to protect itself and to grow.
America's energy policies
The national security of the United States is already at risk because America
depends on imported oil for nearly 60 percent of its daily needs. That will
only grow as demand increases and domestic supplies dwindle. Much of that oil
comes from volatile countries in the Gulf region, and the American money
flowing there does nothing to encourage either more-balanced economic
development or democracy. The rest comes from other parts of the world - often
the most unstable parts. In any case, it all contributes to America's monstrous
trade deficit and worries about what would happen to the economy if some
international crisis disrupted the supply.
The antidotes are simple. Americans need to use far less oil than they do now,
which means requiring more fuel-efficient vehicles and finding an alternative
to refined oil to power cars and trucks.
Beijing's desire for Unocal is fueled in part by the company's natural gas
reserves, most of which are in Asia. The United States cannot claim much of a
national security threat from that. North American gas supplies are still
fairly robust if you count Canada, and the United States can always fall back
on coal to keep the lights on. Coal now provides more than half of America's
electricity anyway.
But none of that should lead to complacency. The United States needs open,
accessible markets. And no fuel source is free from the effects of rising
demand around the world. America needs more-efficient power plants and
more-efficient appliances to reduce demand, just as it needs to develop
more-efficient transportation to reduce dependency on oil.
Trade, currencies and debt
Congress's fixation with devaluing China's yuan to help cut American job losses
is another example of blaming China for what the United States is not doing.
There is no reason to think that revaluing the yuan would lead to American job
growth. Alan Greenspan, chairman of the Federal Reserve, said Thursday that he
saw no credible evidence that a stronger yuan would increase American
manufacturing activity and jobs.
Instead of bashing China, Congress and the Bush administration should be
putting money into bolstering retraining programs to help American workers
whose jobs migrate overseas. And America is going to have to focus on the fact
that young people with mediocre educations are not going to be able to compete
with energetic, educated young people in places like China.
The United States also cannot blame the Chinese government for the weak
position that its own policies have created. The Bush administration's damaging
practice of combining profligate deficit spending with huge tax cuts for the
rich feeds the need for Washington to borrow hundreds of billions of dollars a
year just to keep things going. China has become a major buyer of the Treasury
bonds that finance that debt. A sudden decision by China to invest elsewhere
would very likely have a far more devastating effect on the United States than
a withdrawal of Unocal's resources.
But the solution is not to blame China. It is to institute more sensible
economic policies, including revoking the unnecessary gifts that President
George W. Bush has given to very wealthy Americans at tax time.
Despite Fu's claim about China's friendly bid, it is a contested one, coming
two months after Unocal agreed to be sold to Chevron for $16.4 billion. There
are many shots that remain to be fired in the trench warfare of this corporate
takeover battle. China may or may not come out on top. But even if China loses
this skirmish, it is part of a longer struggle, and those charged with leading
America would do well to spend this time strengthening America from within. No
matter how big and powerful China becomes, China is no match for the United
States at its best.
[Non-text portions of this message have been removed]
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Berdikusi dg Santun & Elegan, dg Semangat Persahabatan. Menuju Indonesia yg
Lebih Baik, in Commonality & Shared Destiny. www.ppi-india.org
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