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Lenovo wins at US game
11/3/2005 13:22

Zhu shenshen/Shanghai Daily news

With strong national economic growth, a number of Chinese companies issued global expansion plans recently.
But they faced trade barriers overseas in the name of national security concerns or penalty tariffs.
In the end, they pay much higher tariffs or even cancel ambitious plans because they can't afford expansion costs.
For example, more than a dozen Chinese shrimp producers, including Liaoning-based Zhonglian Aquatic Product Co Ltd and Guangdong-based Yilin Haida Frozen Aquatic Co Ltd, faced antidumping tariffs from 27.9 percent to 112.8 percent when they tried to export products to markets in the United States.
The US complained that low-cost Chinese and Vietnamese shrimp products hurt its shrimp industry.
The average penalty tariff to Vietnamese shrimp firms was only about 4 percent.
Meanwhile, Wenzhao-based lighter companies faced similar barriers when they exported products to European nations.
But the country's biggest personal computer maker, Lenovo Group Ltd, proved to be an exception to the rule.
On wednesday night, Lenovo won clearance from the Committee on Foreign Investment in the United States (CFIUS) to go ahead with the US$1.25 billion acquisition of the personal computer division of International Business Machines Corp (IBM).
In january, the deal met unexpected resistance from American lawmakers and the US media. The committee investigated the proposed sale on the grounds of national security. Both US lawmakers and the media said state-owned Lenovo poses a potential risk to US government bureaus and current IBM customers.
Passing the clearance hurdle was an obvious victory for the Chinese PC maker as many US government bureaus will now become new Lenovo-IBM customers.
America often plays the national security trump-card to protect its own companies, though it is obviously a form of trade protectionism.
After the merge, Lenovo-IBM will become the world's third-biggest PC maker, according to US-based IT consulting firm Gartner Inc. Lenovo will now compete directly with global leaders Dell Inc and Hewlett-Packard Inc.
Meanwhile, government bureaus are relatively stable customers and usually bring high profit margins to PC vendors, said Binbo Liu, an analyst at China Southern Securities Co Ltd.
The new Lenovo at least will have an equal opportunity to keep high-end customers from Dell and HP.
In a wider view, Chinese firms can learn from Lenovo's success.
Finding a local partner before aiming to penetrate an overseas market has many benefits.
The advantages? A local partner can help a firm avoid trade barriers to some extent. Meanwhile, they can use their partner's brands and do not need to build distribution channels in a different market environment.
Tcl-Thomson and Huawei-3COM are other examples that show Lenovo's strategy is sound.