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Chinese Unocal Bid Backed by Wall Street

China's growing appetite for energy may be driving the bid for Unocal by the country's third-largest oil company. But it may take Wall Street's appetite for cash to drive home the deal's acceptance in the United States.

China's CNOOC and America's Chevron have submitted competing bids to buy California-based Unocal, and its Asian oil reserves. The all-cash $18.5 billion CNOOC bid is financially stronger than Chevron's $16 billion cash and stock offer. But the Chinese company would face regulatory hurdles and political resistance that would not burden a successful Chevron bid.

A range of notable American companies have been employed by CNOOC to smooth the way for its Unocal offer, including Wall Street giants Goldman Sachs and J.P. Morgan Chase.

CNOOC's attempt to buy Unocal may need Wall Street's political clout as much as it needs its financial expertise. Opposition to CNOOC's bid is mounting in Washington.

Unocal is a relatively small oil company that, by itself, is not significant. Opponents of the potential deal are concerned that it is just part of a larger Chinese government strategy to lock-up future energy reserves for the country's roaring economy. The fear is that China could then block oil supplies needed for continued growth in the United States.

Supporters of CNOOC's offer say that any political moves to block a successful deal would distort the market and could harm American business interests overseas.

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Adam Davidson is a contributor to Planet Money, a co-production of NPR and This American Life. He also writes the weekly "It's the Economy" column for the New York Times Magazine.
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