IBM and the India-China axis

Cheap workers aren't the only reason for global information technology empire building


Andrew Leonard
November 15, 2006 8:31PM (UTC)

The letters IBM now stand for India-Beijing-Machines, asserts InformationWeek reporter Paul McDougall in a blog item. IBM is ramping up major expansion plans in India and China. By next year, IBM will have more than 50,000 employees in India. Meanwhile, in China "in the past couple of weeks, IBM has said it would partner with Lehman Brothers to launch a $180 million China investment fund, open new software labs in Beijing, and partner with Chinese universities to create curricula focused on tech services delivery."

IBM's American workers, says McDougall, are understandably alarmed. But the key sentence from McDougall's item is this: China is "the next big source of employees and customers for Big Blue."

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The rush to Asia is not just about finding new ways to exploit labor. It's also about new markets for business. "The entire Fortune 500 is as anxious as IBM is to tap Asia's red hot markets," writes McDougall. "If you're GM and you're thinking of building a hi-tech plant in, say, Guangzhou, the thought of handing off IT support for that plant to IBM rather than some unknown local firm must be comforting."

Funny McDougall should mention Guangzhou. Incidentally, IBM is a minority partner in a Citigroup-led consortium bidding to buy a majority stake in the Guangdong Development Bank, headquartered in Guangzhou. As the Wall Street Journal reports today, the Citigroup alliance will be named the "preferred bidder" for GDB on Thursday, marking a major step in China's WTO-mandated liberalization of the banking sector.

Again, the Citigroup effort to grab a piece of China's banking sector isn't motivated by what Morgan Stanley chief economist Stephen Roach likes to call "labor arbitrage." It's all about getting a piece of the action in the world's hottest economy. (Though I suppose one can argue that China's economy wouldn't be growing so fast if it wasn't for all those other companies taking advantage of labor costs). Another example of transnational disloyalty to the home country? Or simply smart business?


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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China Globalization How The World Works India




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