Fu Chengyu is a smart businessman doing what many chief executives would do if they were in his shoes: trying to grow his company through an acquisition to increase revenues, profits and shareholder value. The difference, however, is that most of the shares of Fu's corporation are owned by the Communist government of China and the acquisition he has his eye on is an oil company in America, where lawmakers are jittery about allowing an important natural resource to fall into the hands of a rising military power.
The startling acquisition attempt by Fu's company, CNOOC, came on June 23, when it made an unsolicited, all-cash bid of $18.5 billion for Unocal, of El Segundo, Calif. The bid by CNOOC (pronounced see'-nook) was especially dramatic because Unocal had already agreed, on April 4, to be acquired by Chevron, of San Ramon, Calif., for $16.5 billion in cash and stock. CNOOC is a subsidiary of China National Offshore Oil Corporation, China's third-largest oil company. CNOOC's shares are traded on the Hong Kong Stock Exchange.
China experts at Wharton and elsewhere say that CNOOC's sweetened bid has understandably caused concern in the U.S. Congress because CNOOC is a government-owned company. But ultimately, some say, there appears to be no sound reason why the U.S. government should move to block the deal, if Unocal shareholders decide it is in their best interests. Observers point out that China already has a large financial interest in America as a creditor holding billions of dollars in U.S. Treasury securities -- an investment that helps finance the operations of the U.S. government and makes up for the paltry rate of savings in the United States.
This is not to suggest that the proposed CNOOC-Unocal deal is run-of-the mill. In fundamental ways, CNOOC's bid underscores a tense and unresolved ambivalence that exists in the minds of both ordinary Americans and government officials responsible for U.S. foreign policy.
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