The Chinese government wants more high-capital companies on its soil
China may have some of the cheapest labor in the world, but it is also a very ambitious country, as proven by the most recent plans that its government has cooked up.The name “Lenovo” doesn't really sound all that Chinese. For those unfamiliar with the company, the name would resemble a mix of French and Italian (“le novo,” the new).
Nevertheless, the company is definitely Chinese, and is one of the only two high-profile electronics and IT companies in the nation with sales of at least ¥100 billion ($16.1 billion / 12.11 billion Euro).
That sales figure is something that the Chinese government wants from at least five more companies.
No doubt, the country wants Lenovo's rapid success to be emulated by as many corporations as possible. It all boils down to economics.
For those that need a refresher, Lenovo became one of the world's top two PC suppliers in a matter of just a few years.
Last year, it even overtook HP for a while, according to at least one analyst firm.
Meanwhile, Huawei has been doing well on the mobile and telecom markets, though it did hit a snag of sorts in 2012, when it and ZTE were labeled threats to the US national security. So far, though, no financial impact has been discerned.
Since China knows now to avoid encountering such obstacles in the future, the process of creating a new Lenovo or Huawei should be straightforward enough.
China's Ministry of Industry and Information Technology (MIIT) has begun advising companies to pursue mergers and acquisitions.
This way, the supply chain will become more integrated, tightly knit as it were, and the competitiveness on a global scale will rise.
The Wall Street Journal says this latest move is part of a broader tactic to consolidate China's major industries (steel, automobile, shipping, cement and aluminum).