- The Washington Times - Wednesday, December 8, 2004

A handful of Chinese companies are evolving from anonymous workshops into powerful global brands as the Asian country becomes an increasingly sophisticated manufacturer.

Lenovo Group’s $1.75 billion purchase of IBM’s personal-computer business this week highlights the success of a Chinese company on the international stage.

Other companies, such as telecommunications equipment manufacturer Huawei Technologies and appliance manufacturer Haier, already have established themselves as global companies competing with the world’s best.

“In all three cases, the model is exactly the same. There is a relatively open domestic market in which the firms have gained a dominant position. They have learned how to compete [against multinational companies] locally and are now following the same model globally,” said Nicholas Lardy, senior fellow at the Institute for International Economics, a Washington think tank.

Chinese companies also control South Korea’s Ssangyong Motors, television brand RCA and the Asian subsidiary of U.S. phone giant Global Crossing Ltd. A state-owned metals trader and producer is in talks to purchase Noranda Inc., Canada’s biggest mining company.

“I think you are seeing the upper tier of Chinese companies — the Haiers, the Huaweis — looking to go abroad. They need to build their brands and they need access to markets,” said Jeremie Waterman, northeast Asia director at the U.S. Chamber of Commerce.

“As companies have more money to invest and as the domestic market evolves, Chinese companies will continue to go abroad,” Mr. Waterman said.

Through the 1990s, Lenovo displaced companies such as IBM, Compaq and Hewlett-Packard as the dominant personal computer (PC) maker in China and carved out the largest market share of any company in Asia.

With the IBM purchase, the company will become the world’s third-biggest PC maker, gain better access to the United States and get rights to the IBM brand for five years. The company will establish its worldwide headquarters in New York.

The purchase does not mean automatic success, but it does announce Lenovo’s arrival on the global stage.

“It will be a challenge, but it is a big step up,” Mr. Lardy said.

Another global player is Huawei, a company looking to compete with U.S.-based Cisco as a telecommunications equipment manufacturer and standard setter in new technologies for the Internet and wireless phones.

The company has a research and development center in Bangalore, India, and smaller offices in the United States and Europe.

Appliance maker Haier has worked to establish itself as a global brand, opening showrooms and manufacturing operations around the world. In the United States, the company has a showroom in New York City and manufacturing operations in South Carolina, in part to be closer to its customer base.

Haier sells wine refrigerators, kitchen refrigerators, freezers, air conditioners, dishwashers, laundry products and other small appliances. Its promotional literature ranks it fourth among the world’s white-goods manufacturers.

But simply investing abroad does not mean automatic success. Haier, like many U.S. manufacturers facing tough competition, last month was forced to lay off workers at its South Carolina refrigerator plant.

And despite the splash by Lenovo, Chinese overseas investments are still relatively small, with limited impact on the global economy so far.

The world’s 30 wealthiest nations invested $576 billion overseas in 2003, according to the Organization for Economic Cooperation and Development. Chinese government statistics, published in the state-controlled People’s Daily, say 7,470 Chinese companies had been approved for $11.4 billion in overseas investments through the end of last year.

That will have to rise if Chinese companies want to become more competitive.

“As Chinese firms look to ascend the food chain, they will need to be more involved internationally,” Mr. Waterman said.

• This article is based in part on wire-service reports.

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