Chinese computer giant Lenovo stunned the business world when it took over IBM's personal computer business years ago, but the move left bruises from which other Chinese firms might well learn.

In spite of the company's dramatic growth in annual turnover from three billion U.S. dollars in 2003 to 13 billion U.S. dollars last year, Lenovo Group vice-president Liu Xiaolin still foresees "twists and turns" on the way to globalization.

"The moment we received orders from the U.S. State Department, it sparked concerns about U.S. national security. How come there was no such response in China when Dell sold laptops to Chinese government departments?" said Liu at a symposium in Beijing on Chinese business internationalization.

Liu's perplexity was shared by the China National Offshore Oil Corporation (CNOOC), which lost to Chevron in its Unocal bid last year. Xiao Zongwei, head of CNOOC investor relations, said the lesson learned was "Never underestimate international political resistance".

Chinese companies have made aggressive attempts at overseas expansion, but the "political factor" has become a hidden issue, said David C. Michael, senior vice-president of the Boston Consulting Group.

He said some Westerners were unprepared for the overseas expansion of Chinese companies and begrudged the sale of domestic natural resources and advanced technologies to a country with a different social system.

Moreover, the "Go Global" strategy initiated by the Chinese government in 2000 aimed to turn large domestic companies into global players, which often led to the misunderstanding that China's enterprise internationalization was manipulated by the government.

However, Liu Xiaolin stressed that the motivation of Lenovo's investment abroad was sheer survival.

As foreign rivals edged further into the Chinese market, Lenovo lost its previous advantage and had to seek a breakthrough.

"Going global is not the only challenge to Lenovo. Only after greater numbers of Chinese firms strengthen their overseas presence -- like Japanese companies did -- can foreign consumers understand that Chinese firms follow the rules. These suspicions will continue until we win them over," he said.

Khalil Hamdani, officer-in-charge of the Division on Investment, Technology and Enterprise Development of the United Nations Conference on Trade and Development (UNCTD), said many developing country governments had improved their regulatory frameworks and some had openly stated their encouragement for enterprises investing abroad.

He said firms from advanced industrialized economies tended to invest abroad to reduce production costs while companies from developing countries were more eager "to improve competitiveness, to access markets, technologies, expertise and natural resources, as well as to survive and to be efficient".

Qi Zhenhong, director of the Economic Cooperation Office of the Ministry of Foreign Affairs, said foreign political resistance to Chinese firms investing abroad indicated a trend toward "economic nationalism".

Triggered by phenomenal growth in the outward foreign direct investment (OFDI) of developing countries, this trend focused first on cross-border mergers and acquisitions with the real purpose of "catering to nationalist sentiment by way of protecting domestic markets", he said.

For instance, since the latter half of last year, the so-called national security concern in the U.S. had checked the CNOOC's acquisition of Unocal and the Dubai Ports take-over of the operations of U.S. ports.

To prevent European iron and steel group Arcelor from being acquired by India-based Mittal Steel, Spain, France and Luxemburg teamed up to play a "fair trade" card, he added.

"Nationalist sentiment, stoked by government officials, labor unions and media, is spreading and this will worsen the environment for firms of developing countries wanting to invest abroad," Qi said.

Hamdani called on both home and host countries to support OFDI from developing countries. "There are no safe havens, therefore enterprises need to internationalize to increase competitiveness and improve profitability," he said.

Source: Xinhua