The IBM's proposed sale of its personal computer division to China-based Lenovo run into trouble in US Congress on January 26. A trio of high-ranking Republican members of the House of Representatives called for a full security review of the sale over US security concerns.

Many in US commercial circles have been shocked by the deal, but are generally optimistic about the purchase of IBM's PC business. They believe that US Commerce Department will approve the deal through a two-month-long review.

Three ask for the review

Republican Reps Duncan Hunter of California and Henry Hyde and Don Manzullo, both of Illinois, asked for the review. They are chairman of the House Armed Services Committee, chairman of the House International Relations Committee and Chairman of the House Committee on Small Business respectively.

They wrote to the Treasury Secretary John Snow and asked for the full and secret review by the US Committee on Foreign Investment in the United States. They said in the letter that "considering the relations between the "small businesses'' and their government we believe it is in line with the public interests to prolong the review deadline for the deal''.

They said that the deal may "lead to the control or sharing by the Chinese government over the enterprises taking part in or involving US government contracts''. "Washington Post" says more clearly that "it is reportedly feared that the deal could help the transfer of US military-related technologies to China, leading to Chinese government's control over the companies holding part of US government contracts''.

In addition, the three call for the Bush administration to brief on the influence in three aspects of national security, technical registration and governmental contracts.

Review process

According to related experts, Bush administration has to have the suggestions under consideration and make full review of the deal due to the important position of the three representatives in the House.

Generally speaking, any one of foreign firms buying or investing in American companies should be reviewed by the US Committee on Foreign Investment over the its national security reasons. The panel, which meets in secret, includes representatives from the departments of Treasury, Defense, Justice, Commerce, State and Homeland Security. The committee is run by Treasury Secretary John Snow and makes recommendations directly to the president, who can block sales for national security reasons.

According to US laws, after an official deal notice filed by US firm to the US Committee on Foreign Investment the committee will start for review. Generally there is no problem. If the committee decides to launch a full review, the review should start within 30 days upon receiving the notice. The deadline lasts 45 days at most. And there are another 15 days for deciding whether to give its approval or not.

IBM filed the required legal notice with the Committee on Foreign Investments at the end of last December. So by the end of this month, the committee is expected to decide whether to launch a review.

Rare action

According to an Associated Press report on January 27 it is rare to have acquisitions review. Last year, the committee conducted only one such probe out of nearly 50 cases, according to John B. Reynolds III, a lawyer for Wiley, Rein & Fielding who specializes in these deals. In more than 1,500 deals submitted to the committee for approval since its inception, it has conducted formal investigations only 22 times, Reynolds said.

In US history George H.W. Bush is the only president ever to block such a deal, stopping the sale of a Seattle aircraft parts manufacturer to China in February 1990.

In some other cases some US firms withdrew their deals during the reviews. For instance, the Global Crossing was first ready to sell technologies to Hutchison Whampao Limited in Hong Kong, and finally to a Singaporean firm due to deal cancellation for the review.

Commercial circles' surprise

For the twists and turns in trade, IBM spokesman Edward Barbini refused to make comments. IBM will agree to be reviewed according to the normal procedure in an IBM statement. The Associated Press quoted from IBM sources as saying that on January 26 IBM officials have made explanations to the committee on the deal conditions.

Harris Miller, president of the Washington-based Information Technology Association of America, a leading trade group, expressed surprise the Bush administration has raised any security questions, saying components in IBM computers already are largely manufactured in China and elsewhere. "They're really chasing a rabbit down a hole if they're launching a prolonged investigation'', Miller said. "I will be more surprised if the authorities rejects the deal'', said Clyde Prestowitz, president of the Washington-based Economic Strategy Institute of the United States.

William A. Reinsch, president of National Foreign Trade Council in US and once a commercial official under Clinton Administration forecast that "their fear cannot stand careful review''.

By People's Daily Online