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108 China Haier Group and U.S.A. Maytag Merge. China Spends Trade Monies in U.S.
26th Week 2005 / The Haier Group, China's largest refrigerator maker, and two U.S. buyout firms offered $1.28 billion for Maytag, topping an earlier bid by Ripplewood Holdings. Maytag's stock rose 86 cents to $16.09.






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With ready cash, and U.S. treasury bonds in hand, plus a strong desire to buy into global ownership, Chinese companies have stepped up their 8 Yuan to 1 Dollar shopping spree to acquire U.S. assets, was highlighted by their offer to purchase Unocal Corp. and an offer for Maytag Corp. SEE UNICAL OFFER
Because of China's reluctance to revalue its currency, above the U.S. dollar, U.S. government officials say that the Chinese yuan is undervalued by as much as 40%, giving China an unfair trade advantage over the U.S.
"There's going to be a fuss about this in Washington for sure, something that should be worth 8 billion, China will only have to pay, 1 billion. and I don't think it is a foregone conclusion that Washington would say yes" to a Unocal deal, say people close to China dealmakers. "But I see no reason why it's not reasonable to have Chinese companies investing in American companies, just like we're happy to have Russian companies investing here or British companies investing here."
Although China has long welcomed foreign funds, the Beijing regime is opening the nation's doors wider to U.S. investment in previously closed sectors such as financial services and transportation. Last week, Bank of America Corp. announced that it was investing $3 billion for a 9% stake in China Construction Bank, one of China's largest banks.
The Haier Group, buyout offer of $1.28 billion for Maytag, tops an earlier bid by Ripplewood Holdings. Maytag's stock rose 86 cents to $16.09, a good reason to announce the offer in the media
Those possible deals, along with the $1.25-billion purchase in December by China's Lenovo Group Ltd. of IBM Corp.'s personal computer division, are the cutting edge of a new wave of overseas investment involving powerful but little-known Chinese companies.
They are seeking to acquire badly needed natural resources or move beyond their low-cost manufacturing base, said Donald Tang, chairman of Bear Stearns Asia. The path is a well-trodden one, used by companies from Japan, South Korea and Taiwan to get U.S. toeholds.
By purchasing global management expertise, technology, brand-name visibility and marketing networks, Chinese firms can leapfrog competitors, boost profit margins and bolster their attractiveness to consumers and investors.
Outside of natural resources, the most likely acquisition targets are U.S. companies involved in consumer electronics, appliances or high technology, in which China has already mastered manufacturing skills, analysts say.
Haier's bid for Maytag, like Lenovo's purchase of IBM's PC division, are examples of this trend, being promoted by U.S. government officials. It teaches capitalism at its best. Haier opened a refrigerator factory in Camden, S.C., in 2000 but has been struggling to expand sales in the competitive U.S. market.
"Once you have the technology, the manufacturing know-how and the brand name, the competitive landscape will be changed," said Tang, who also heads the Asia Society's Southern California branch.
Tony Luh, managing director and co-founder of Dragon Venture Inc., a San Jose-based venture capital firm specializing in China, said the U.S. telecommunications sector was a likely place for future purchases, given the aggressive expansion efforts of Huawei Technologies Co., China's leading telecom firm. Huawei is reportedly considering a bid for Britain's Marconi, which is up for sale.
China's growing need for strategic resources such as oil or iron ore is also driving its investment push. China is already the world's second-largest oil consumer, after the U.S., and a leading buyer of coal, steel and other commodities needed to fuel its export-oriented factories and domestic building boom.
The bid, if successful, would be the first mainland Chinese entry into the politically sensitive U.S. oil sector. But China's leading state-owned companies, like CNOOC, have been investing heavily in oil, natural gas and mineral projects around the world, including recent deals in the Canadian oil sands, reportedly the largest oil reserve after Saudi Arabia.
And in late 2003, China's Laiwu Steel Group teamed up with Cleveland-Cliffs Inc., a Cleveland-based mining firm, to reopen a bankrupt iron ore mine in an economically depressed region of northern Minnesota.
Local officials and the steelworker union welcomed the Laiwu deal, which not only helped resurrect a mine that now employs 425 people but also saved more than 100 railroad and shipping jobs in the region. To date, the partnership has agreed to invest more than $35 million for equipment and an expanded production line, said Rep. James L. Oberstar (D-Minn.), who helped engineer the deal.
"If it keeps jobs here, it's damn good," he said, when asked about Chinese investments in the U.S. economy.
But critics of China vowed to increase pressure on the Bush administration to look more critically at China's investments in the U.S. In the late 1990s, they foiled an effort by China Ocean Shipping Co., China's giant state-owned shipping firm, to take over a closed Navy base at the Port of Long Beach, alleging that the Chinese could use that facility as a base for spying.
Rep. Richard W. Pombo (R-Tracy) and Rep. Duncan Hunter (R-El Cajon) sent a letter Friday to President Bush urging him to initiate a review of China's expansion in the energy arena, including any future bid by CNOOC for Unocal. Under U.S. law, the Committee on Foreign Investment in the United States, a Treasury Department panel, is responsible for vetting any foreign purchases that could threaten U.S. security.
C. Richard D'Amato, chairman of the U.S.-China Economic and Security Review Commission, a congressional committee that has been sharply critical of U.S. policy toward China, said the implications of expanded Chinese investment were troubling because of the potential for future conflicts with that growing Asian power.
In addition to the security issues, he said, the U.S. government should consider the long-term threat to U.S. competitiveness.
"One danger, to put it bluntly, is that after buying a company, they can loot the assets and move that technology and know-how to China over time, just like we do here, said people close to U.S. China dealmaking," But remember, the 2008 Olympic are up and coming up, and like the Russian Games, we found a reason to boycott the games, REMEMBER?



ByLines: Editors Note

More Articles • Converging News 262005 / TeleCom Buy Outs and Asset Seizure Boom

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