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Concerns mount over IBM-Lenovo deal

January 27, 2005: 2:37 PM EST

NEW YORK (CNN/Money) - The proposed sale of IBM's personal computer unit to China's Lenovo Group may pose a threat to national security and needs a closer review, three Republican lawmakers said in a letter to Treasury Secretary John Snow.

The letter -- signed this week by House Armed Services Committee Chairman Duncan Hunter, House Small Business Committee Chairman Don Manzullo and House International Relations Committee Chairman Henry Hyde -- said the deal could eventually transfer advanced technology and corporate assets from IBM (Research) to the Chinese government.

The deal, worth about $1.75 billion, including about $500 million in assumed debt, may also pass on licensable or export-controlled technology to Beijing and may result in certain U.S. government contracts involving PCs being fulfilled by the Chinese government, according to the letter.

Lenovo is China's largest PC maker, and its stock is listed in Hong Kong.

The company is owned by Legend Holdings, which according to PCWorld.com is closely tied to the Chinese Academy of Sciences, a government institution that manages national scientific research efforts in China and is directly overseen by the State Council -- China's highest administrative body.

U.S. regulators have blocked deals by Chinese firms over espionage and national-security concerns.

In 2003, they stopped a bid by Hong Kong-based Hutchison Whampoa to buy the bankrupt telecommunications company Global Crossing (Research). In 1999, the regulators also blocked a $450 million satellite sale to a Chinese-led consortium over similar concerns.

Hunter, Manzullo and Hyde said the U.S. government agencies should conduct a briefing on the national-security, licensing issues and any U.S. government contracts affected by the sale before any final determination is made.  Top of page


Legend Holdings
Hutchison Whampoa Limited
Global Crossing
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