Mark Gilbert: Maverick set to play by its own rules

As China starts to flex its muscles on the global financial stage, the world had better get used to a maverick nation ignoring protocol on everything from currency policy to how takeovers get financed.

United States officials and company executives are poised to cry foul as CNOOC, China's third-biggest oil company, gets a US$7 billion ($10.3 billion) helping hand from its state-owned parent to fund its US$18.5 billion pursuit of Unocal, the eighth-biggest American oil company. Two loans, one at below-market rates, one at a zero rate, are helping CNOOC top an offer from Chevron.

With parent company China National Offshore Oil lending US$4.5 billion at 3.5 per cent for 30 years and an additional US$2.5 billion in an interest-free bridge loan, the Chinese Government is effectively bankrolling the deal.

And, just as Chinese officials have so far rejected US calls to revalue the yuan, they are likely to ignore protests about how CNOOC is financing its bid.

Last month, the Chinese Ministry of Commerce exhorted its companies "to cultivate a group of independent famous brands that have international influence."

Lenovo's US$1.25 billion December purchase of IBM's PC unit was a huge hint that Chinese companies may decide it's quicker to buy global brands than build them.

The recent move by Haier, China's largest home-appliance maker, to join a gang of investors bidding US$1.28 billion for Maytag reinforces that argument.

Not so long ago, China's place near the bottom of the food chain of global commerce seemed clear. Putting a can of fizzy drink in the hand of 1.3 billion eager new consumers would make your company rich.

But instead of being the world's consumer, China became the world's workshop. Manufacturing companies paying their local employees a fraction of what workers in the European Union earn were able to undercut competitors.

What nobody seemed to anticipate was the deflationary effect of Chinese exports of manufactured goods on the one hand, and the inflationary push on commodity and energy prices on the other.

Last month, Wal-Mart, the world's biggest retailer, said it had increased its annual purchase of goods from China to US$18 billion from US$15 billion. Men's cotton polo shirts at US$9.63 and women's ribbed T-shirts at US$8.88, available from Wal-Mart's Web site, are evidence of how China effectively exports deflation to the rest of the world.

The Fed has now driven borrowing costs up to 3.25 per cent and shows no sign of pausing. The central bank seems to be worrying about the second part of the China equation, the section that helped drive oil above US$60 a barrel last month and copper prices to a record in April.

Last week, PetroChina, the nation's biggest oil producer and worth US$131 billion, overtook Toyota to become Asia's biggest company by market value.

In an article in the official China Daily newspaper's online edition in November, former Chinese Vice-Premier Qian Qichen said the "US is dreaming if it thought the 21st century was the American century". Halfway through the first decade, it is certainly starting to look like China's century.

Imagine the jolt for US politicians, who have threatened to slap tariffs on Chinese goods in misguided retaliation for China's impudence in running a US$162 billion trade surplus with the US last year, once they realise China Inc is using cheap Government money to buy their beloved Standard & Poor's 500 companies. China marches to its own drum. Get used to it.

- BLOOMBERG