The Chinese have retreated for the moment, but Gary Becker and Richard Posner do not believe it is a victory. Becker:
The attempted takeover of Unocal by CNOOC aroused great opposition in Congress, which resulted in Senator Byron Dorgan introducing a bill that would prohibit any takeover or merger of these two companies. After pursuing Unocal for several months, CNOOC accepted defeat last Tuesday and withdrew its offer, blaming the Washington political atmosphere.
The Dorgan bill lists several reasons why the purchase of Unocal by CNOOC would not be in America's interests, but none are convincing...
Most politicians and journalists, and even many economists, support free trade, including purchase by foreign companies of American assets, only when other countries abide by the same free trade rules. As the Dorgan bill indicates, China does not allow free movement of capital, and restricts foreign purchases of Chinese companies. These policies hurt China, but nevertheless the US is better off when it allows foreign companies, including those from China, to bid for American companies. If they are high bidders, either they would overpay for the assets-called the "winners curse" in auction theory- or they are more efficient managers. The US benefits even in the second case because it raises overall productivity of the American economy, and sets a good example for competitors.
Posner agrees with Becker, and essentially makes an argument that suggests inhibiting such direct investment in U.S. companies could have a destabilizing effect:
China holds vast amounts of U.S. dollars. To the extent that these holdings exceed China's need for financial reserves, China can benefit from holding dollars only by exchanging them for valuable goods, such as goods produced in the United States or assets of U.S. companies. We should want China to be able to make such purchases, since otherwise it will be less willing to hold dollars, which is to say less willing to sell us valuable goods in exchange for pieces of paper.
Do read the whole thing.
UPDATE: The Washington Post's Sebastian Mallaby suggests some geopolitcal arguments for treating of the successful Congressional resistance as a pyrrhic victory.