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Oh, My God! The Chinese Are Coming!They're buying IBM's PC business. What's next—McDonald's?

By Daniel Gross
Posted Friday, Dec. 3, 2004, at 4:11 PM ET
Illustration by Mark Alan Stamaty

The New York Times has a genuine scoop today. IBM, which introduced its widely cloned personal computer in 1981, has put its PC business on the block. The news is not earth-shattering. PCs are a small business for IBM—the unit is expected to fetch between $1 billion and $2 billion, while IBM has a market capitalization of $162 billion. IBM lags far behind market leaders Dell and HP. And personal computers are a brutally competitive business, with Twiggy-like margins. What was once an expensive luxury has become a cheap commodity, propelled in large part by the rise of Taiwan and China as component manufacturers.

The surprise in the Times story is the potential buyer. IBM most likely won't be selling the unit to an American competitor or to a Japanese rival like Fujitsu. Instead, Andrew Ross Sorkin and Steve Lohr report, the likely buyer is Lenovo, China's biggest PC maker. (Lenovo used to be known as Legend.)

It's not just PC businesses that Chinese companies are bidding for. Huawei Technologies, China's answer to Cisco Systems, has also been shopping in the United States. The Wall Street Journal reported a couple of weeks ago that Wanxiang, China's largest auto parts company, has acquired or set up joint ventures with several small struggling Midwestern companies. It now employs about 1,000 Americans.

What should Americans make of the Chinese shopping spree? The media will offer you two convenient narratives. Pick the one you prefer.

First, "Happy Globalism." Until recently, the Chinese have taken the boatloads of dollars we sent them and recycled them into Treasury bonds. Now Chinese companies are investing some of those greenbacks into something more productive: companies and businesses. Here in the United States, we're schooled to think of foreign direct investment—a vital component of global capital flows—as going from the First World into the Third. Now the river is running in the opposite direction. These American businesses, some of them bankrupt or on the verge of abandonment, are getting dynamic new parent companies. It's just another step in the continued seamless integration of the world's economy. Man, globalism is cool!

And hey, we've been through this before. In the 1980s, Japanese investors recycled dollars into American landmark properties like Rockefeller Center. They didn't take the GE building and the skating rink back to Osaka. Tom Friedman, call your agent! It's time for The Lexus and the Egg Roll.

Second, "The Asian Peril Returns." For years, China has been pounding U.S. businesses into bankruptcy with its low wages, authoritarian central government, and blasé attitude toward intellectual property. Now, they're taking all the money they've "earned" from unfair competition and buying up our industrial patrimony. Cars, computers. What's next, McDonald's? McKinsey? (Actually, that's a good idea. Just think of the havoc 1,000 Harvard MBAs could do over there!) It's bad enough that millions of Americans have to work for the Japanese (Toyota), the Germans (Siemens), or the French (Au Bon Pain—just kidding, Frenchies!). Now they're going to be reporting to masters in Beijing. At the company barbecue, they'll be serving fried rice instead of fried Twinkies! Man, globalism sucks.

And hey, we've been through this before. In the 1980s, Japanese investors recycled dollars into American landmark properties like Rockefeller Center—what if they had taken the GE building and the skating rink back to Osaka? Pat Buchanan, call your agent! You too, Michael Crichton! It's time for Another Rising Sun.

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Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at . He is the author of Pop! Why Bubbles Are Great for the Economy.
Illustration by Mark Alan Stamaty.Photograph of Chinese flag on the Slate home page © Royalty-Free/Corbis.
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