Skip to: Content
Skip to: Site Navigation
Skip to: Search

Ever heard of Lenovo, Haier, CNOOC? You will.

(Page 2 of 2)

Until last week, few American investors had heard of China National Offshore Oil Corp., that nation's third-largest oil company. Then its Hong Kong subsidiary, CNOOC, made a surprise play for US-based Unocal Corp., outbidding another American oil company, Chevron. The bid - easily the largest foreign takeover attempt ever by a Chinese company - has sparked political concerns in the US about the implications of China's rise as an economic power.

Skip to next paragraph
Security worries

A CNOOC takeover would have "disastrous consequences for our economic and national security," US Rep. Richard Pombo (R) of California said at a congressional hearing last week. The Bush administration says it is initiating a top-to-bottom review of its Chinese trade policy.

The brouhaha over CNOOC highlights the perception problems that China's big companies face. They're making their move into the US at a time when American anxieties over China's enormous trade surplus are rising sharply. China is not the first Asian country to face these problems, but it comes with unique challenges. The brands come from a country that is still communist.

Indeed, many of China's new global players are still wholly or partially state-owned, although they function like privately owned companies and are listed on the world's stock exchanges. Lenovo was spawned by the Chinese Academy of Sciences in 1984 at the beginning of China's market transformation and opening to the world. For most of Lenovo's life, CAS still held a majority interest. Haier's longtime chief executive, Zhang Ruimin, likes to call himself the "Chinese Jack Welch" after the famous American business icon and former head of GE. But Jack Welch was never a member of the Central Committee of the Chinese Communist Party.

These Chinese companies may fail because, insulated by the protected cocoon of their home market, they lack global savvy and experienced managers, some say. But Haier, TCL, and Lenovo honed their management and business skills before launching global subsidiaries. The influx of foreign competition in China, especially in the three years since China joined the World Trade Organization, has provided the locals with tough, world-class competition.

Buy the management

Then there's the question of experience abroad. Some management experts wonder whether the Chinese companies will be able to develop the cadres of managers able to operate in foreign locales.

Lenovo officials, for example, talk openly about their need for international management experience.

"The only way I can do my job well is to learn the way IBM does it as soon as possible," Qiao Song, Lenovo's heard of procurement, told Wired magazine.

By acquiring IBM's PC division, Lenovo has gained many seasoned IBM executives. The purchase and decision to move its corporate headquarters to the US may pay off in the long term. "The move is important not only for branding purposes but even more so for developing capabilities," says Professor Shenkar.

Lenovo was almost knocked out by American and European computer firms, when tariffs on imported computers were lowered substantially in the early 1990s. It still faces intense competition at home from Dell - competition that has kept its profit margins and stock values low. Yet it withstood the foreign onslaught to emerge as the largest seller of personal computers in China and now it's the third-largest PC company in the world.

Four Chinese brand names to remember


Head office: Beijing (soon New York)

Founded: 1984, in a two-room bungalow in Beijing by 11 scientists from the Chinese Academy of Sciences, a government agency charged with commercializing research. It's now the leading PC maker in China and the third-largest PC maker in the world.

State ownership: Lenovo's purchase of IBM's PC division last year put the government's stake at just under 30 percent.


Head office: Hong Kong

Founded: 1981, to make cassette tapes. Now the world's largest maker of television sets.

Acquisitions: German electronic-appliance maker Schneider; joint venture with France's Thomson Electronics.

State ownership: The Huizhou Municipality owns 25 percent, the rest public.


Head office: Qingdao

Founded: 1987. China's leading maker of white goods, such as washing machines and mini-refrigerators. In the US since 1994. Opened a factory in Camden, S.C., to make full-size refrigerators for the US market.

State ownership: None; Haier is a "collective," with 100 percent of profits retained by the company.

Pearl River Piano

Head office: Guangzhou

Founded: 1956, well before market reforms were introduced but has prospered in recent years selling pianos to rising Chinese middle class. Owns the world's largest piano factory, turning out 250 models a day. Has joint venture with Japanese pianomaker Yamaha.

State ownership: 100 percent Guangzhou Municipality.