THE Federal Reserve chairman, Alan Greenspan, teamed up with Treasury secretary John Snow to urge calm. Once again, American politicians and policy wonks are up in arms about a foreign takeover of an American company, in this case the attempted acquisition of Unocal by China’s National Offshore Oil Corporation (CNOOC). To those who remember the hysteria that greeted Japan's purchase of Rockefeller Centre, the jewel in the crown of New York real estate, in the late 1980s, “It ’s déjà vu all over again”, to borrow a phrase from the former baseball star Yogi Berra.

Still, today’s Chinese takeover movement is different from the earlier buying spree by Japanese companies. Japan was not a rival for influence in Asia or in the world; China is. Japan was not a big competitor for scarce resources such as oil; China is. Japanese companies were privately owned; China’s acquirers are state-run entities. Japan is a democratic country and, by and large, an American ally; China most definitely is not. Japan did not engage in the wholesale theft of intellectual property; China does. Japan did not buy strategic assets: ownership of New York property has no implication for national security; ownership of oil resources does.

CNOOC’s $20 billion, all-cash bid for Unocal is only one of several being made by the Chinese regime, eager to expand the international influence of its state-owned companies. Last week, China’s Haier offered $1.3 billion for Maytag, the troubled manufacturer of home appliances, with 20,000 workers. And a few months ago Lenovo, a Chinese computer maker, bought IBM’s PC business for $1.7 billion.

It is impossible to predict if the CNOOC bid will succeed. It does top Chevron’s offer by about $2 billion, but the American oil company, much larger than CNOOC, is quite capable of raising its already-generous offer. Or Unocal’s board might decide that the American authorities are so likely to veto the CNOOC bid as a threat to American security, that it would be wise to accept the lower Chevron offer.

But whatever the outcome of CNOOC's decision to bid for a large American oil company, it has raised the temperature of the already red-hot dispute over trade policy. The American authorities are starting to realise that US companies are not operating in a free market as that term is generally understood. The battle for Unocal is not a bidding war between two privately owned companies, both responsible for maximising shareholder value. CNOOC is 70% state-owned, expected to act in support of the regime’s geopolitical objectives. That makes a mockery of the Chinese authorities’ warning to the American government not to politicise the CNOOC takeover bid. China has decided on the conversion of its leading companies into important multinationals as part of an aggressive policy of projecting Chinese power around the world.

That policy is most noticeable in oil markets. China’s acquisition of Unocal's substantial Asian assets will increase its political influence in that part of the world. China has also bought 40% of Sinopec’s Northern Light oil sands project in Canada, at an ultimate cost of $2 billion; taken a 10% stake in an Azerbaijan field and pipeline; and invested in Venezuela’s oil industry in return for President Hugo Chávez’s promise to divert some of his nation’s crude from America to fuel-hungry Chinese factories.

All this comes against the background of mounting congressional support for action against China. Even before the recent surge in clothing imports forced President Bush to impose quotas, the Senate expressed approval of a bill to impose a 27.5% tariff on all made-in-China products. Its sponsors claim such a levy would offset the low exchange value at which China artificially maintains its currency.

Faced with the senators’ hostility, the famously inarticulate Snow could not defend the administration’s refusal to respond effectively to what the senators see as an unfair trading environment, acquisitions that threaten national security, and China’s refusal to end its more-than $25 billion annual theft of American intellectual property. Congress is frustrated by the administration’s refusal to back its years-long importunings to China with action “within the rule of law”, as was said by Senator Charles Grassley, the Iowa Republican who chairs the senate finance committee.

The administration’s critics won the war of words with Snow, but are overlooking serious problems with the positions they are urging on the president. For one thing, the flood of low-cost Chinese imports has kept retail prices down. The resulting absence of significant inflation has helped to keep long-term interest rates low enough to allow the boom in the housing industry to roll on.

For another, China’s labour-cost advantage is so great that its goods will find their way to Wal-Mart’s shelves even if the authorities allow the yuan to rise. But a more valuable yuan will make it cheaper for China to acquire dollar assets, an unintended consequence that China critics are overlooking.

Meanwhile, not everyone is unhappy with China’s acquisition spree. China’s entry into equity markets will have a favourable effect on share prices. Investment bankers see a new source of merger fees. And firms with assets of interest to China see buyers who might be emulating Japan’s acquirers in the 1980s. Just as the Rockefellers and other American property owners sold to the Japanese at the peak of a commercial office rental boom, Unocal might sell to the Chinese at the peak of an oil-price boom, and Maytag flog its assets to them when the firm is in irreversible decline.

If opponents do kill the CNOOC deal, they might unwittingly spare China the fate of those Japanese who lusted after dollar assets. Having bought high, the Japanese eventually sold low. After a default and at a substantial loss, Japan’s investors restored Rockefeller Centre to American ownership.

• Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute

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