China: The Lotus Flower Is Blossoming Again

China only occasionally appears in the daily news in the United States, but it actually deserves much more attention. The road ahead is a rocky one, but leading inexorably toward colossal power.

by Cecil E. Maranville

The story of IBM's sale of its personal computer (PC) unit to China's Lenovo Group Ltd. sent a jolt through the business world. But it didn't garner the attention it deserved from the world in general. Perhaps the story did not catch your eye or ear.

Still, it is a story you should know, for it portends much for the future of the entire world. Get used to hearing "China" in conjunction with manufacturing, exports, imports, the value of the U.S. dollar, trade deficits, military confrontations and much more.

Let's begin by examining what's happening between IBM and Lenovo. It's an oversimplification to say that IBM sold the entirety of its PC business to the Chinese computer giant. Actually, IBM CEO Samuel Palmisano negotiated a business partnership with Lenovo, a deal that instantly makes it the third largest computer company in the world (behind Dell and Hewlett-Packard). IBM isn't selling the store and walking away. At least for the next five years, it will handle all sales and marketing of the PCs that Lenovo produces.

When announcing the deal, Palmisano called it "three-dimensional." IBM will assist China in one of the most significant trends in today's world, that of turning the developing giant into a high technology country. Palmisano nurtured a relationship with the government, as well as with Lenovo executives, for more than a year before putting ink to a contract. He explains, "What we wanted was not a divestiture, but the strategic relationship with Lenovo and China" (Steve Lohr, "Deal With Lenovo Is IBM's 'China Card,'" The New York Times, Dec. 14, 2004).

The Washington Post reported a human-interest angle that illustrates what is happening, not only with this deal, but also with many others: "During an IBM employee meeting here Wednesday [Dec. 8 at IBM's PC division in North Carolina], a worker got up and asked a question that perhaps only 10 years ago would have been unthinkable: If he wanted to keep his job helping to design some of the world's most advanced computers, would he have to move to China?

Read the full article at www.wnponline.org/wnp/wnp0501/lotusflower.htm

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