Shanghai, August 7:

Chinese oil company CNOOC’s failed bid for Unocal Corp was a painful lesson for Beijing on the potential pitfalls of overseas mergers and acquisitions, but it’s unlikely to spoil China’s growing appetite for foreign investments — including in the US.

Hungry for energy and other natural resources and driven by political and commercial imperatives to seek out new markets, advanced technology and brand names, Chinese companies are bound to keep hunting for global investment opportunities, despite the political risks, analysts said.

“They probably will pick their targets more carefully but they will continue to come out,” says Jack J T Huang, chairman of international law firm Jones Day’s Greater China practice, “Market pressure will continue to push them out.” CNOOC Ltd indicated it would persist in its strategy of investing overseas, despite its decision to withdraw its offer for Unocal.

“We look forward to continuing our strategy and business plan and to growing our business for our shareholders,” CNOOC said.

By Thursday, reports had already surfaced that CNOOC was considering a bid for Australia’s Woodside Petroleum Ltd — reports Woodside branded as speculation. Eager to tap foreign markets, Chinese authorities are pushing top Chinese companies to go global, says Huang.

With the economy growing at an annual rate of more than nine per cent, crude imports have been soaring. CNOOC and other government-controlled oil companies were among the first Chinese companies to begin actively making big investments abroad, buying up big stakes in oil and gas fields in places such as Indonesia and Iran.

The lack of political backlash over those earlier ventures may have left CNOOC ill-prepared for the reaction to its bid for Unocal, where US lawmakers raised questions over

whether the deal might threaten American economic and national

security interests. It hasn’t been all bad news for Chinese companies to invest in the US.

Computer maker Lenovo’s acquisition of IBM’s PC unit for $1.75 billion also raised a brouhaha and prompted a US security review, but it eventually went ahead — as do many other deals that draw less attention. But with the global race to secure energy resources, Chinese oil and mineral companies in particular are likely to face hurdles and opposition in most parts of the world.

“People are becoming very nationalistic over what’s in their ground,” says James McGregor, author of the book ‘A Billion Customers: Lessons From the Front Lines of Doing Business in China.’ Beijing might be able to make oil deals in some developing countries, but there are few desirable Third World takeover targets.

Russia has massive energy reserves, but oil firm Yukos’ financial woes have already caused disruptions to oil trade with China, accentuating the risks of investments there. Chinese acquisitions in Europe, such as TCL Corp’s deals with France’s Thomson SA and Alcatel SA, have so far raised less of a stir, “but there’s potential for a backlash there, too,” says Stella Leung, a partner at law firm O’Melveny & Myers in Shanghai, “I can only imagine a same if not tougher reaction among European countries.”

In Australia, where Chinese oil, mineral and steel companies have been actively courting strategic partners, a takeover attempt on Woodside would face “significant hurdles,” said John Hirjee, an energy analyst at Deutsche Bank Australia in Melbourne.

Even Thailand, which has sought close ties with China, warned Beijing against letting a Chinese group led by state-owned China National Petroleum Corp attempt to buy Thai oil and gas assets recently sold by Houston.

“Bangkok dealt with that diplomatically, very early on,” says Jason Kindopp, an Asia analyst. Despite the occasional failure, all signs suggest that Beijing remains committed to

its policy, which it has dubbed the ‘going out strategy,’ of encouraging overseas investments.