China's push to buy US companies such as Unocal Corp and Maytag Corp may benefit the American economy.

Overseas takeovers of US firms often bring an infusion of capital and additional markets, say economists such as Catherine L. Mann of the Institute for International Economics in Washington. In China's case, she and other experts say, acquisitions also give the Chinese Government a bigger incentive to seek better trade relations with the US.

"It turns them into a stakeholder," says Stephen Roach, chief global economist at Morgan Stanley & Co in New York.

To economists such as Roach, buying businesses is less of a concern than expanding Chinese holdings of US Treasury securities that currently total US$230 billion, second only to the amount amassed by Japan.

While China needs to own Treasuries to protect the value of its currency, the yuan, such a huge holding poses a potential risk for the US. The securities can easily be sold, which would push down the value of the dollar and make it harder for the US to finance its current account deficit, which totals more than 6 per cent of economic output.

Roach says it's better for the US economy to have China using some of the dollars generated by its trade surplus with the US to acquire American corporations, because such investments are much harder to dump quickly.

Foreign investment in the US has lagged since the 2000-2001 recession. The US$18.5 billion CNOOC has offered for Unocal would equal about a quarter of the US$72.6 billion foreigners spent last year acquiring US businesses, according to a June report from the Commerce Department. That's down from a high of US$322.7 billion in 2000.

CNOOC's offer followed last month's US$1.28 billion bid for Newton, Iowa-based Maytag from a group of investors including Haier Group, China's largest home-appliance maker, and last year's purchase of International Business Machines Corp's personal- computer division by China's Lenovo Group Ltd. Those deals are "just the beginning," says Donald H. Straszheim, former Merrill Lynch & Co chief economist and now president of Straszheim Global Advisors in Los Angeles.

"There are going to be big numbers in the next couple of years," says Straszheim, who predicts that Chinese acquisitions of US companies will approach US$80 billion over the next two years, up from an estimated US$7 billion in 2004 and about US$344 million five years ago.

China's push to buy US companies recalls Japan's acquisition binge in the 1980s after that country accumulated excess dollar reserves. China will be "a lot more strategic" about its buying than Japan was, Straszheim says. While the Japanese bought trophy properties such as the Rockefeller Centre and the Pebble Beach, California, golf club, he says, China is looking for acquisitions that will provide a needed commodity such as oil, or a recognized American brand name such as Maytag, the No 3 US appliance maker.

Haier's bid for Maytag, Straszheim says, would give the Chinese manufacturer a global brand name and US managerial experience. He says that Maytag, in turn, would gain access to Haier's Chinese factories, enabling it to compete more effectively at home with No 1 appliance-maker Whirlpool Corp. Plus, Haier is likely to pour new capital into Maytag.

Maytag posted its first annual loss in almost a decade last year because it's been slower than rivals to move factories to low- cost regions such as Eastern Europe and Latin America. The company has been hurt by newer designs from Germany's Siemens AG, and appliances from Asian manufacturers such as LG Electronics Inc.

Chief Executive Ralph Hake has cut Maytag's workforce by 20 per cent since 2001 and said in April that more job reductions were likely. Until Haier's bid, the only potential buyer was a group including Ripplewood Holdings LLC.

Overseas takeovers of US companies aren't rare. Among deals in 2004 were the US$10.5-billion purchase of Charter One Financial Inc by the Edinburgh-based Royal Bank of Scotland Group Plc and the US$4.5 billion takeover of Richfield, the Ohio-based International Steel Group Inc, by Ispat International NV, a Dutch steelmaker.

A US firm taken over by an overseas investor almost always gets an infusion of capital and a broader market for its products, says Dan Griswold, trade analyst at the Cato Institute, a Washington research group that favours free-market policies.

"Foreign investment generally delivers better jobs to Americans," Griswold says. "We sacrifice our own economic well-being if we create a hostile environment."

Source: China Daily