entry of IBM and the Chinese government into a partnership deal to form the Lenovo joint venture
has had a beneficial side effect to U.S.-China trade. The three largest PC manufacturers in China
— in order, Lenovo, Founder, and Tongfang — have agreed to preload Microsoft Windows onto
their machines for domestic sale.
This is huge news. When I was in Beijing only last April, just after the merger deal closed,
Lenovo admitted that it couldn't sell PCs with Windows on them because they were just too
expensive. Buyers were used to getting their systems with DOS or Linux. The vendors preferred
DOS because it loads more quickly during manufacturing, and buyers liked it because it makes a
great boot disk for Windows, which, until this year, everybody in China used but nobody paid for.
As part of its transition to a mature company, Lenovo worked with Microsoft to preload Windows
at the factory and thus reduce software stealing in China, which, until then, held the country
record as worst offender, with piracy rates in excess of 90%.
Only a year ago, Lenovo's top management in China admitted that the company shipped more
than 90% of its systems without Windows. Today, almost all of its systems ship with Windows
preloaded. As the largest PC vendor in China, Lenovo has set an example for the others, which
have begun to follow. The news this week was that the number three vendor, Tongfang, has
agreed to fall in line with intellectual property law and ship preloaded Windows systems.
Thus, by extending and expanding trade links between the United States and China through
mergers, joint ventures, technology exchanges, and investments, both parties benefit. China
joins the league of nations as an equal partner with all the rights and obligations inherent to such
a position, and the United States gains access to the vast capital that China has been building
through its trade surplus. American companies get paid for their work and the use of their
property. Employment on both sides increases, and consumers get better products (although
they have to pay for that quality).
As part of warming relations, Chinese officials this past week signed $15 billion in trade deals,
according to Xinhua News Agency, including $700 million in Windows software purchases by the
three largest Chinese PC makers. That's quite a lot of progress for vendors that could barely sell
any Windows a year ago.
Microsoft should be ecstatic, since reducing piracy is one of the few ways that the company can
increase revenues without raising prices. Lenovo and the other Chinese vendors should be
applauded for stepping up. By behaving in a civilized manner, these companies can help build
the kind of business trust that will be crucial for China as it assumes its role as a major
international economy.
Roger L. Kay is the founder and president of Endpoint Technologies Associates (www.ndpta.
com).
© 2006 Endpoint Technologies Associates, Inc. All rights reserved.
