The gathering storm over China's unsolicited $18.5 billion bid for a U.S. oil company is the latest evidence that China has become the meta-issue of U.S. economic policy.
The runaway trade deficit is blamed on Chinese currency manipulation. And China's booming textile imports have become a central issue in a proposed Central American free trade agreement. The housing bubble, outsourcing, rising energy prices and concerns about intellectual property -- all of these issues have a China angle as well.
Beijing, however, has had enough. Just days after the House of Representatives passed a resolution calling on the Bush administration to block the Unocal purchase by CNOOC Ltd. on national security grounds, the Chinese foreign ministry demanded that Congress "correct its mistaken ways of politicizing economic and trade issues." Fu Chengyu, CNOOC's American-educated chairman, complains that all he's doing is playing the capitalist game long championed by the United States.
Most analysts agree that the national security concerns raised by a Unocal sale are largely bogus: Most of Unocal's reserves are in Asia, and what little oil and gas there is in North America CNOOC has agreed to leave here.
And at a time when General Motors has become the largest carmaker in China, Bank of America is about to buy into one of the country's largest banks and U.S. firms have poured nearly $50 billion into Chinese companies, this hardly seems the time for the United States to be challenging foreign direct investment.
But CNOOC's bid for Unocal is hardly the purely free-market transaction that Fu claims it is. The Chinese government controls its parent company and the banks that would lend it the money to make its acquisition. And the Chinese government, which is busy trying to negotiate assured supplies of oil and gas from its neighbors to the north and west, is clearly uncomfortable with the idea of relying on global energy markets to satisfy its needs.
The legitimate fear is that, in a world of ever-rising energy prices, China might decide to sell its oil and gas to Chinese companies at something less than world market prices, giving them a competitive advantage in contested global markets. That would violate World Trade Organization rules -- but no more so than current Chinese practices of tolerating rampant intellectual piracy or setting artificial currency values to boost exports.
All of these issues will be on the table this weekend when the U.S. secretaries of state and commerce and the U.S. trade representative arrive in Beijing for talks. But while negotiations will focus on narrow issues, the overarching political reality may be that Chinese capitalism has replaced Soviet communism in the American psyche.