Tuesday, December 21, 2004

Dragon makes a move and Americans are all shook up

ND Batra: From The Statesman

WHAT’S in a name?

A lot.

Brand is the thing, the real thing in the global economy.

Suddenly the old question, “Guess, who is coming to dinner?” has assumed a new meaning.

Chop sticks, please. We’re Chinese.

Although no security alert or red flag went up when it was announced that a most celebrated icon of the US technology, IBM, was selling a part of itself, as it were, its brain, ThinkPad, to a Chinese company, Lenovo Group, for a paltry sum of $1.25 billion, a diffused state of anxiety and discomfort set in. Chinese companies, even when some of them don’t know how to manage themselves — Chinese Aviation Oil (Singapore) is a case in point — are nonetheless so ambitious that they are on an international hunt for acquisitions, especially for global brands.

IBM’s sale of its personal computer business would catapult Lenovo to become the third biggest computer company in the world, after Dell and Hewlett-Packard. “As Chinese companies move from prey to predator, they are also sitting on a powerful advantage: A possible currency revaluation. If the yuan rises 10 per cent, 20 per cent or even 40 per cent analysts expect, overseas acquisitions of household-name companies and properties become that much cheaper. In other words we haven’t seen anything yet from China,” writes Bloomberg’s columnist William Pesek Jr.

The Brits too have become alarmed and wonder whether America will become China-compatible one day, a secondary power at the service of a new superpower that’s sans freedom, sans, democracy, sans human rights. David Smith and Dominic Rushe recently wrote in the Sunday Times: “The sale of IBM’s personal computer business to a Chinese group shows that China is no longer content to be just the world’s workshop. It wants to own global businesses as well, and is using its low-cost advantages to embark on the acquisition trail. The Lenovo-IBM deal represents a coming of age for China. Until recently the economy that will dominate in the 21st century has been content to be the new workshop of the world. Now it has signalled that it wants a big slice of the control, and the boardroom action, as well.”

The fall of the dollar is not only bringing hordes of Europeans to shop and vacation, it is also bringing Chinese investors to buy businesses and industries, much as it happened in the 1980s when the Japanese went on a shopping spree. Of course ThinkPad will look like ThinkPad, which in fact is part of the deal that will allow Lenovo to keep the brand, and IBM, as a junior partner, would stand by it. But eventually ThinkPad would succumb to the Wal-Mart effect: Bring down the price. So would the quality, perhaps. But there are others who think that IBM’s sale of its PC business would have far reaching consequences because it is more than the simple fact that a part of Americana is being nibbled away by a foreign competitor. China’s unprecedented economic growth, galloping international trade and desperate hunt for raw materials, from oil to minerals, would give it a compelling reason for world domination.

Mark Helprin, a Wall Street Journal contributing editor and senior fellow of the Claremont Institute for the Study of Statesmanship and Political Philosophy, recently wrote that the days of the US dominated unipolar world are over. He contends that China is following the example of the militaristic Japan under the Meiji and plans to dominate the Pacific Ocean. The immense economic growth generated by market economy has made China the world’s second largest economy in purchasing power parity with a total GDP of $6.5 trillion, which is likely to double in eight to 10 years at the present rate of growth. China “harbors major ambitions” and plans to counter the USA in outer space, oceans and in cyberspace (The acquisition of IBM PC business by Lenovo may be a step in that direction).

While the USA is bogged down in fighting Islamic insurgencies and terrorism, China is slowly taking weaker states of South-East Asia (consider, for example, the Asean-China free trade agreement) under its protective wings. Helprin warns: “This century will be not just the century of terrorism: terrorism will fade. It will be a naval century, with the Pacific its centre, and challenges in the remotest places of the world offered not by dervishes and crazy-men but by a great power that is at last and at least America’s equal. Unfortunately, it is in our nature neither to foresee nor prepare for what lies beyond the rim.” Condoleezza Rice, the US Secretary of State designate, and Defence Secretary Donald Rumsfeld wouldn’t necessarily agree with that assessment.

All this might seem obsessively alarmist but no one should discount the Chinese goal of ultimately bringing Taiwan into its fold. Its trump card ironically may be the nuclear North Korea, about which the USA is extremely worried, a country over which China has more influence than it admits. But what has this to do with Lenovo buying ThinkPad from IBM? Diplomacy and corporate power work in tandem and China uses both to advance its national interests.

No comments:

Post a Comment