Last updated: January 27, 2005 7:36 pm

Lenovo confident US will not derail IBM deal

Lenovo, China's biggest personal computer maker, said on Thursday it was confident that it would be allowed to complete its acquisition of IBM's PC business in the second quarter despite demands in the US for a security review.

Yang Yuanqing, chief executive, said the company had not received any notice from Washington that the deal could not go ahead. ?The acquisition is proceeding as normal,? Mr Yang said, adding that Lenovo would co-operate closely with any US investigation. State-controlled Lenovo announced a $1.75bn bid for IBM's US-based PC division in December. The deal would be the biggest overseas takeover by a Chinese company.

But this week three Republican congressmen called for a full security review of the sale, insisting the proposed deal could result in advanced US technology and corporate assets falling into Chinese government hands.

Lenovo's senior managers appeared baffled by the accusation. ?I don't think [the transaction] is a threat to the US's national security?, Mr Yang said, because PCs were relatively low-end technology.

Speaking at the World Economic Forum in Davos, Carly Fiorina, chairman and chief executive of Hewlett-Packard, said the Republican initiative was in line with established practice. But she insisted there were likely to be other deals involving Chinese companies.

?We need to be realistic about the fact that this is a global economy with global players and in a global economy there will be transactions between China and US, and China and Europe. In the end, that is a good thing,? Ms Fiorina said. ?IBM-Lenovo will not be the last time that we see a China-US deal.?

Beijing has not yet reacted to US opposition to the deal. But if Washington blocked the transaction it would provide powerful ammunition to those in Beijing who remain sceptical about the degree to which the US is ready to welcome China's integration into the global economy.

Mr Yang defended the deal with IBM, which has been heavily criticised. Lenovo's shares fell 21.5 per cent on news of the deal. On Monday, they rose 7.4 per cent when the US opposition emerged. On Thursday they finished unchanged at HK$2.10.

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