Shooting Our Own Foot
SIX WEEKS AGO the Chinese bid for Unocal Corp., a California-based oil company, was viewed as the latest confirmation of an unstoppable wave. A Chinese firm had already bought IBM's personal computer business, and another had bid for Maytag, a U.S. maker of such household appliance brands as the venerable Hoover. Unocal's suitor, China National Offshore Oil Corp., was described as a fearsome example of that country's growing business sophistication: Its chief executive had studied in California; its board included two respected Western businessmen; it had retained an expensive army of American takeover advisers. But yesterday the Chinese abandoned their quest for Unocal, two weeks after dropping out of the bidding for Maytag.
The first lesson here is that China is not quite the omniscient challenger that it's sometimes cracked up to be. Some China commentary, aimed perhaps at mining the endlessly rich market for gloom about long-term U.S. competitiveness, depicts a country managed by far-seeing mandarins who know exactly how their nation will displace America as the world's dominant power. But the truth is that Chinese strategists are at least as capable of blunders as Americans. In the case of the Unocal bid, that supposedly savvy chief executive gave an interview to The Post's Peter S. Goodman in which he asserted, implausibly, that his firm was independent from the Chinese state. Equally, China's case was damaged by an outburst from its government, which lectured Congress on meddling in commerce -- a rich accusation from a communist dictatorship and one guaranteed to produce an unfriendly congressional backlash.
Nor is this the only recent example of Chinese bungling. Last month, after a year or so of dithering, China revalued its currency against the dollar. But the 2.1 percent move was probably too small to end financial speculation on a further revaluation, and the central bank has sent muddled signals on what it intends to do next. First the bank's chief described the 2.1 percent change as merely an "initial" move, but then came an official statement proclaiming that no further moves were on the way. China's currency policy looks less like the work of brilliant technocrats than the result of an unresolved struggle between pro-revaluation reformers and anti-revaluation hard-liners.
So China may be less formidable than it is sometimes thought to be, but there's not much cause to celebrate. The Unocal bid failed in the end because protectionists in Congress threatened to delay and possibly block it; this uncertainty made a rival bid from Chevron Corp. seem more attractive to Unocal's shareholders, even though Chevron was offering less. But Congress had no basis for this obstructionism. So the second lesson here is that when foreigners aren't brilliant enough to threaten U.S. interests, the United States is capable of shooting itself in the foot.
Congress got in the way of the Unocal bid partly because it feared that Chinese control of a U.S. oil company would harm U.S. consumers. But if China had bought Unocal and shipped all its output back home, this would simply have reduced Chinese purchases of other oil. The world oil price would not have changed, and U.S. consumers would have had no reason to notice. Equally, Congress resented the idea that the Chinese bid was partially financed by cheap loans from the Chinese government. But this is what enabled the Chinese to offer a premium to Unocal's U.S. shareholders and also to pledge to preserve Unocal's American jobs. Chinese government subsidies for U.S. shareholders and workers: What would have been wrong with that?