Triangle Business Today

Economist: Lenovo's server deal with IBM is a win for China

Posted January 29, 2014

— NCSU economist Dr. Michael Walden sees Lenovo's acquisition of IBM's lower-end server business for $2.3 billion as a boost to China's economy.

Most of Lenovo's business is located in China, and Walden sees similarities between this deal as well as the recent acquisition of Smithfield Foods by a China firm.

"One way to look at this (and similar deals, such as Smithfield Foods) is as a payment for the goods we have bought with China and the trade deficit we have with them," Waden told WRALTechWire when asked for his reaction to the Lenovo-IBM deal announced early Thursday.

"The trade deficit means China has accumulated US dollars. They have bought a large amount of US government debt with those dollars. But we would expect them to diversify into companies which attract them - and which they have decided provide them with a strategic advantage," he said.

Lenovo is public company with shares traded on the Hong Kong stock exchange. However, it is the dominate PC provider in China and is No. 1 in computer sales globally. Lenovo also is a growing force in smartphones and tablets in China as well as around the world.

Walden sees Lenovo's growth as boosting China's economy - and technology base.

"Smithfield gives them access to meat for the changing eating habits of their population," Walden explained. "Tech - of course - is on everyone's list as a growth sector for the future. So China sees Lenovo's expansion both to meet domestic demand as well as worldwide demand for technology (broadly defined)."

In terms of the overal economic trend the deal reflects, Walden pointed out:

"Bottom line: We buy manufactured goods from China and ultimately pay for them with financial and real (companies) assets."

By the way, there is another substantial investment in a Triangle technology firm: Epic Games, a global leader in gaming technology as well as games. Tencent, a huge and fast-growing Internet company based in China, holds some 40 percent of Epic.



Please with your account to comment on this story. You also will need a Facebook account to comment.

Oldest First
View all

About this Blog:

Jeremy Salemson, CEO of Corporate Investors Mortgage Group, blogs about economic trends and data and their impact on Triangle business. Each week, he interviews a Triangle-area business leader for a personal look at the local economy.