China National Offshore Oil Corp (CNOOC) has to bear the cost of its abandoned bid for the American oil company Unocal.

But the fallout from the bid will not only affect the Chinese side. The idea of the United States as a self-appointed champion of the free market has become questionable.

On Tuesday CNOOC, China's third largest oil and gas producer, withdrew from the Unocal takeover battle with Chevron.

Despite making an offer of US$18.5 billion over Chevron's US$17.4 billion, the Chinese company decided to pull back due to unacceptable risk resulting from the unfavourable political environment in the United States.

Such an end to CNOOC's overseas foray, the largest takeover bid ever attempted by a Chinese company, was indeed unsatisfactory, though expected given the rising opposition to the deal among US politicians.

The huge amount of investment the Chinese company made in preparation for the eight-month quest amounts to nothing more than a red figure over its bottom line.

But the cost may be the price of learning how to expand in countries where regulations and the political environment differ so much from Chinese domestic conditions.

Other Chinese companies on the way to investing abroad will draw bitter but useful lessons from CNOOC's takeover attempt, both in terms of how to better prepare for potential political risks and how to withdraw to protect shareholders' interests.

After all, as more and more Chinese enterprises are growing, their overseas expansion will be a natural result of as well as a driving force behind economic globalization.

The unsuccessful CNOOC bid may make domestic enterprises pause for a while to carefully review their expansion plans, but it will not stop them from transforming themselves into competitive players in the international arena.

In this sense, the cost CNOOC paid is limited. But the outcome of the failure of the takeover bid on the US side may be more serious than some US politicians have calculated.

The unjustified US opposition, largely politically motivated, will certainly more or less poison the current prevailing mood as bilateral economic ties between China and the United States are enhanced.

The high-profile takeover battle demonstrated to the world that the United States is not a free economy as it claimed to be. In the US market, an asset for sale has not gone to the buyer that most prized it, because of regulatory concerns fuelled by bogus fears and hidden interests.

Apparently, Unocal shareholders chose to accept the cheaper offer free of regulatory risk. But the politicized regulatory matter has, in fact, deprived them of the chance to maximize value, as the market should allow.

The implications may not be what US policy-makers intended when foreign investment is badly needed to finance the soaring trade and budget deficits to sustain economic growth.

However, the explicit message the takeover battle sends to the world is that American business is defined by political needs.

That practice will incur many unknown costs for foreign investors. In the long run, the casualty will be on US competitiveness if the market is to play second fiddle to protectionism with political patronage.