The Chinese Challenge

NYT ^ | 6/27/2005 | Paul Krugman

[ex-Texan]

There's nothing shocking per se about the fact that Chinese buyers are now seeking control over some American companies. * * * America, which imports far more than it exports, has been living for years on borrowed funds, and lately China has been buying many of our I.O.U.'s.

Until now, the Chinese have mainly invested in U.S. government bonds. But bonds yield neither a high rate of return nor control over how the money is spent.

So it was predictable that, sooner or later, the Chinese would stop buying so many dollar bonds. Either they would stop buying American I.O.U.'s altogether, causing a plunge in the dollar, or they would stop being satisfied with the role of passive financiers, and demand the power that comes with ownership. * * *

The more important difference from Japan's investment is that China * * * really does seem to be emerging as America's strategic rival and a competitor for scarce resources - which makes last week's other big Chinese offer more than just a business proposition. * * *

The China National Offshore Oil Corporation, a company that is 70 percent owned by the Chinese government, is seeking to acquire control of Unocal, an energy company with global reach. In particular, Unocal has a history - oddly ignored in much reporting on the Chinese offer - of doing business with problematic regimes in difficult places, including the Burmese junta and the Taliban.

Unocal sounds, in other words, like exactly the kind of company the Chinese government might want to control if it envisions a sort of "great game" in which major economic powers scramble for access to far-flung oil and natural gas reserves. * * *

If it were up to me, I'd block the Chinese bid for Unocal.

[ex-Texan]

China is not acting like "America's stategic rival and competitor." It is, in fact, acting like our enemy. This is not some "great game" to control the world's natural resources. We are seeing Beijing playing for all the marbles and using money from Americans to do it. They are turning America's hunger for cheaper goods into cash to purchase our strategic assets.

But what do I know anyway. I'm just a geezer living in the Peoples Republic of Oregon.

[King Prout]

chicom ping

[Natural Law]

The good news is that China is no longer a communist country. The bad news is that it is now a facist country.

[Skeeve14]

Perhaps treating them more like the communist that they are would help.

1980's communism=evil empire 2000's communism=good for business

[snowsislander]

I agree with Mr. Krugman on this point: that we should block the sale of Unocal to the Chinese.