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Chinese Shares Catch a Break
Page 2



To be sure, regional investors have also gritted their teeth over the possibility of more policy tightening to slow down breakneck GDP growth in China. But Huang considers aggressive intervention unlikely, because it could lead to higher unemployment and increase bad loans at China's banks. Already in late April, Beijing raised interest rates, and regulators have recently been pressuring banks to slow the pace of loans to the booming real estate sector.

Meanwhile, this weekend brought another twist in a national security hubbub involving the U.S. State Department's purchase of computers from China-based Lenovo. On Saturday, one of China's best-known economic papers weighed in on the issue. Its complaint, in a nutshell: the U.S. government's actions have unfairly called into question Lenovo's independence and reputation.

Two weeks ago, a minor furor erupted on revelations that the State Department was buying 16,000 PCs from China's Lenovo, 9,000 of which would be used for classified work. U.S. politicos charged that the Chinese government, which owns a stake in Lenovo through one of its research arms, might covertly tinker with the PCs, then use them to siphon off state secrets. An embarrassed Foggy Bottom staged a quick retreat, saying it would be sure to use Lenovo computers only for non-classified work.

Now one of the hawkish China analysts who raised the alarm over Lenovo has tried to present his side of things to the Chinese press.

In a letter published over the weekend in the Economic Observer, a leading Chinese newspaper, Larry Wortzel, chairman of the U.S.-China Economic and Security Review Commission, said purchasing Lenovo PCs may "endanger U.S. national security," noting that a research arm of the Chinese government (the Chinese Academy of Sciences) owns 27% of Lenovo shares.

The response from the Chinese: a spirited defense of free trade.

In an editorial, the paper argued that Lenovo is a legitimate private company, not a government subsidiary, and there's no evidence that Lenovo's PCs would be used for espionage. The bottom line: PC sales shouldn't be subject to politicking.

It's an interesting countertake, because the Economic Observer is highly respected for its content and not a mere official mouthpiece. Its comments likely reflect the view not just in Beijing's corridors of power, but among China's own patriotic-minded citizenry (who are just as inclined to defend home-team players as Americans would be).

Expect more cross-border bickering along these lines in the future, as China's IT industry grows more sophisticated and expansion-minded. The country's most successful technology widgetmakers are increasingly bound to collide with foreign governments that are nervous about China's geopolitical ambitions.






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