Posted on 01/31/2005 12:31:33 PM PST by Willie Green
For education and discussion only. Not for commercial use.
On its face, I.B.M.'s planned sale of its personal computer business to Lenovo of China for $1.75 billion hardly seems a deal that would prompt a national security investigation by the Bush administration.
Most I.B.M. personal computers are now produced in China. Like other PC's, the I.B.M. machines are powered by Intel microprocessors and are assembled with chips and parts made around the world, though mainly in East Asia.
"I don't think anybody has stood up and said with a straight face that PC's are a critical military technology," said William A. Reinsch, president of the National Foreign Trade Council and a former trade official in the Clinton administration.
But the Committee on Foreign Investment in the United States, a multiagency group, will carry out a formal investigation, which is expected to last 45 days, people close to the inquiry have confirmed. The escalation of the committee's examination from a review, begun a month ago, to a formal investigation was reported on Friday by The Financial Times and The Wall Street Journal.
The investigation, foreign trade specialists said, is not surprising at a time when China's stature, both economically and strategically, is in rapid ascent. It has become a manufacturing center for the global economy, is a rising technological power and poses a challenge to the American economy on several fronts. "The I.B.M. deal falls right into the middle of all that," said Michael R. Wessel, a member of the United States-China Economic and Security Review Commission, a group established by Congress. "This deal and this investigation are going to send an important message that these transactions will be scrutinized and that China is an important player on the world stage."
The investigation appears to have caught I.B.M. somewhat by surprise. In an interview shortly after the deal was announced on Dec. 7, Samuel J. Palmisano, I.B.M.'s chief executive, said he was reassured that most of the commentary about the I.B.M.-Lenovo transaction was that it was a sign of the tightening of mutually beneficial economic links between the United States and China - and that no political ramification had surfaced initially.
I.B.M. was aware there would be a review of the transaction by the foreign investment committee, which was established in 1975 and in 1988 was given a stronger mandate to conduct national security reviews of foreign investments. But Mr. Palmisano seemed to suggest that the impression I.B.M. took away from its initial talks with the administration was that the foreign investment committee's review would likely be routine and present no hurdle to its sale.
But last Tuesday, the Republican chairmen of three House committees, in a letter to Treasury Secretary John W. Snow, urged the administration to begin an extended investigation. Mr. Snow is chairman of the foreign investment committee.
Congress is not represented on the administration's foreign investment committee, which includes representatives from the Homeland Security, Defense, Justice, Treasury and Commerce departments, among others. But the administration, trade specialists say, cannot afford to appear to be brushing aside any legitimate questions by Congress or security analysts within the government.
Some members of the foreign investment committee, according to people close to the inquiry, have raised questions about whether the sale of I.B.M.'s PC business to Lenovo may increase the potential for industrial espionage and the transfer of technology for possible military uses, given that the Chinese government owns a large stake of Lenovo.
The concern, these people said, is that research and development work at I.B.M.'s PC operations in the United States in areas like battery technology, encryption and product integration could be used to advance China's military capabilities.
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