Two of China's biggest companies, PC giant Lenovo and carmaker Shanghai Automotive, made headlines with billion dollar deals to buy up prominent Western brands as part of global expansion drives. In the case of Lenovo, China's leading computer maker, the big deal was the company's US$1.75bn takeover of the PC side of IBM – the largest overseas acquisition by a Chinese company to date.
The other case saw China's biggest automaker, Shanghai Automotive Industrial Corp (SAIC), close to signing a US$1.85bn deal with Britain's Rover group, setting up a new company to produce cars for the Chinese market.
In both situations, the deals, while substantial, are more impressive for their symbolism than their substance.
A landmark deal for China… and IBM
While IBM dominated the PC market in the first half of the 1980s, in recent years the company's PC business has provided only a small proportion of its revenue and profits.
Analysts say it has been looking to cash out of its PC business to concentrate on its more lucrative corporate services business. Lenovo, on the other hand, has been pushing hard to move its brand onto the international stage.
Meanwhile Rover, a once prestige auto brand in the British market, is now a shadow of its former self and in desperate need of new capital.
SAIC, however, has a large pool of cash and ambitions to become one of the world's top five carmakers.
As China Economic Review has previously reported (November '04), a Rover- SAIC deal had been on the cards for some time and is seen by many analysts as an obvious marriage between the capital and overseas expansion ambitions on the Chinese side with Rover's sales network and established R&D capabilities.
Both deals reflect the increasing focus of Chinese companies on projecting their brands overseas in order to ensure continued growth and move higher up the value chain.
As Lenovo Founder and Chairman Liu Chuanzhi said, welcoming the deal with IBM: "This acquisition will allow Chinese industry to make significant inroads on its path to globalization."
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