China throws down gauntlet to USA Inc

[SLCPUNK]

Guardian - UK Observer



China throws down gauntlet to USA Inc Frank Kane Sunday June 26, 2005 Observer

If you want to understand the global economy and feel the pulse of capitalism in the early 21st century, look no further than the $19 billion bid by the China National Oil Operating Company - Cnooc - for Unocal of California. Add a large measure of geopolitical tension, and you have probably the single most important corporate event of the young millennium. The offer - which Cnooc's president Fu Chengyu and his team have been considering ever since rival US oil giant Chevron agreed a takeover of Unocal for $16.5 billion - encapsulates the growing business confidence of China, the land of totalitarian capitalism. Its dynamic economy needs raw materials if it is to continue the eye-watering growth rates of the past few years. Chinese demand has already helped push up global commodity prices, including oil. Now Beijing wants to own the means of production, too. A middle-ranking American oil company will do nicely.

American nerves are already frazzled by the rate at which China is catching it up as the world's biggest economic power. There have been takeovers by Chinese groups of such pillars of US capitalism as IBM's PC business and Hoover. These are serious brands - but not in the same league as an oil company with real, strategically significant assets. West coast senators are already beginning to lobby the President, who must be worried by the prospect of Chinese ownership of a quintessentially American business. (When Japan bought up a chunk of USA Inc in the Eighties, it was regarded as a corporate Pearl Harbour.) Throw in the spat over Chinese textile exports to the US and Europe, which will be the centre of bitter recriminations at the next meeting of the World Trade Organisation, and the import of the Cnooc bid looms even larger.

Americans will not admit it, but they are almost impotent in the face of Chinese financial firepower. The Cnooc bid is in cash, backed by the near-limitless resources of the Chinese state, and in a country like the US, which has always lived by the epigram 'cash is king', it looks hard to beat. Chevron would certainly struggle to match it. That is why the political lobby is already rolling, with much muttering about the 'national security' implications of the proposed deal.

(Notice, however, that such patriotic concerns do not extend to Wall Street. Goldman Sachs and JP Morgan, perhaps the finest names on the Street of Dreams, are advising the Chinese. Morgan Stanley is waving the flag for Unocal, but its fate will probably be decided by the mainly American hedge funds that dominate its share register. The business of America, it seems, is not business, but finance.)

And - to seal American paranoia - China is also a major holder of US debt. Put simply, the US is in hock to the Chinese to such an extent that if all the bills were called in at once, Uncle Sam would be bust. It's not in China's interests to destabilise the world economy at the moment, but circumstances change. Beijing might just like to keep that card - a financial nuclear option - up its sleeve for some future geopolitical crisis.

Corporate America will climb a traumatic learning curve over this bid, and be forced to confront the growing reality of Chinese economic power. For business people elsewhere, the lesson is far simpler: learn Mandarin - now.

[Kujo]

First Jack Bauer now this, damn Chinese.


Our good old governments policy of "Dont worry about it until it burns you" Well its gotten pretty damn hot near the stove.

[BigCombo]

To play the devil's advocate----China's currency is pegged to the dollar.  If China sold all their US debt holdings, the yuan would rise.  However, a cheap yuan is good for China's export market....basically, China may seem like it has a lot of leverage, but a weak dollar would throw the world economy into destablization, thus it'd be a zero-sum game.

[heinous]

With the 2nd to 4th largest economy (depending on how you measure it) China is obviously the big up-and-comer on the world stage and would no doubt love to eclipse the United States.? However, to say America is "almost impotent in the face of Chinese financial power" is simply a stretch by a left-of-center British newspaper.? By the overall tone of the story, it seems the intent (by both the paper and the Kujjo/SLC) was more of an attempt to stick it to the U.S. than to tout China's power.

Nevertheless, two facts remain.? First, since Rome crushed Carthage, no superpower has come onto the world scene peacefully.? Second, China's spending on its military is likely now (or will soon be) closer to the U.S. Dept. of Defense's $90 billion estimation than the officially declared $30 billion.

The United States and China coming into military conflict sooner or later is certainly a possibility.? Maybe a probability.

However, something tells me I won't need to take up Mandarin.....

[Prometheus]

then should it not be in the intrest of oilcorp to push its huge profits towards alternative engeries? hydrogen would be a great way to go. with their combined might they could thrust into an ironic future where the Oil industry is heralded as the bringers of a clean and brighter future not dependant on forgien oil. Oil corp would still make huge profits selling international. they would have built the production capabilties that would ensure that they would be the front runners on the globe and would have the market almost locked down.

given that both indias and chinas oil requirements are growing at breakneck speeds the $60/barrel could be maintained without the US demand. Consider that if such a future were to play out and the US demand would never be nil, current domestic supplies would be able to support the industries that are not yet switched from oil, and the remained may only really be a need for the "war" stock of the military.

Imagine pulling up to the pumps in you 2015 Chevy Tahoe, and paying 30 cents a gallon for a fill up of H₂. go the extra step and add a further feature to the stations and autos have H₂O tanks that save the expended pure water for when you return to the pump that is pumped fom your car during your fill up giving you a discount based on the volume of water that is returned to the station. Then the fuel companies take that oil back to the H₂ plants where it is reused to create the next lot of fuel for the consumer. meaning that less water is used from nature after it is first removed. hell you may only save one buck on a fill up but it would be nice now wouldnt it.

[SLCPUNK]

but a weak dollar would throw the world economy into destablization, thus it'd be a zero-sum game.

The world is beginning to shy away from the sinking US dollar in lieu of the Euro.

Nevertheless, two facts remain.  First, since Rome crushed Carthage, no superpower has come onto the world scene peacefully.  Second, China's spending on its military is likely now (or will soon be) closer to the U.S. Dept. of Defense's $90 billion estimation than the officially declared $30 billion.

The United States and China coming into military conflict sooner or later is certainly a possibility.  Maybe a probability.

Your chest thumping while shifting the subject to military power does not dismiss cold hard facts. Cold hard facts are that China essentially owns the USA.

There will not be any military conflict, there won't have to be. Calling the notes would be enough.

[Prometheus]

though the calling in on the debts would kill the US.... it would kill chinas exporting ability by seriously driving up its net worth and lowering the export base that it currently has

[SLCPUNK]

though the calling in on the debts would kill the US.... it would kill chinas exporting ability by seriously driving up its net worth and lowering the export base that it currently has

That scenario is unlikely yes, but who would still emerge the winner if they did?

They could also quit buying the debt............

They are already moving away from the USA T bonds which will put even more downward pressure on the dollar. Just doing this will cause problems, they don't have to cut their nose off to spite their face (not that they would anyway.)

[Prometheus]

That scenario is unlikely yes, but who would still emerge the winner if they did?

ah my friend that would be decided in blood