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Tea with Liu Chuanzhi

04-08 16:32 Caijing

Liu Chuanzhi describes his life as having had two distinct phases - before and after the creation of what is now Legend Holdings.

 

He says that Lenovo’s profit growth will be limited if the company focuses only on producing hardware.

 

“There is a niche in developing software that link up computers with mobile phones. This integrated technology, or mobile-computer interface, opens up the chance for manufacturers like Lenovo to develop its own software and to be a pioneer in the field,” he said. “This is what we’re going after.”

 

But PC sales are the problem at hand. He said that the company will focus on selling less-expensive computers in China for the time being. Lenovo’s push, he added, will be centered on a computer that costs around 3,000 yuan - or about $440.

 

In 2000, Lenovo sold 2 million computers in China, which accounted for 27 percent of the market. In 2007, the company had about the same market share but sales had grown to 10.7 million computers.

 

“Among the 8 million new computers sold, half were sold to small towns and villages,” he said, leaning forward in his chair and gripping the armrest as he makes his point. “That explains the market potential.”

 

Computers are replacing bicycles and television sets as rural status symbols in China and, perhaps more importantly, are an increasingly necessary item in the dowry a man presents to his bride. But there is also growing use of the Internet in China’s countryside thanks to massive government investment in a nationwide broadband network a decade ago.

 

“An orange wholesaler can get information on orange prices in the northeast by going on the Internet,” Mr. Liu says. “That puts him in a better negotiating position when he goes to sell.”

 

These are the sorts of things he talks about with his peers. They are wealthy men of extreme entrepreneurial talent who nonetheless are politically impotent: party politics still dominate decisions in China.

 

He mentions Jack Ma, founder of the online global trading company, Alibaba Group, as man in whom he confides. He also spends a couple weekends a year with an exclusive entrepreneurs’ club called Tai Shan, named after the sacred mountain associated with sunrise, birth, and renewal. There are currently just 15 members.

 

Otherwise, Mr. Liu has adopted the trappings of a corporate chairman as he waits for China to change.

He goes golfing with his brother and son on the poetically named Ten Thousand Willow Golf Course, a tightly packed system of fairways and greens on a nearby swatch of land surrounded by highways and high-rises. He plays a couple times each winter at a course in Guangdong province, near Lenovo’s original factory and where a friend owns a villa.

 

The books on his desk speak of a curious, eclectic mind: Barak Obama’s The Audacity of Hope and A Conversation between Two Generations of Military Men, a book about the Sino-Japanese war by the son of the late General Zhang Aiping.

 

He is particularly enthusiastic about Clyde Prestowitz’s Three Billion New Capitalists, a book about “the powerful yet barely visible trends that are threatening to end the six-hundred-year run of Western domination of the world,” according to its jacket. Mr. Liu says he has given the book to many friends and many government officials.

 

He’s not ready to give up on the PC business yet. When asked if the PC sales will become less important to Lenovo going forward, he gives an answer that alludes to his company’s origins in the state, which remains the company’s largest shareholder.

 

“If we set profit growth as a top priority, we might go down that path,” he says. “But if the shareholders have other requests, we might look into other opportunities. Say for example - this is not true - but suppose the shareholders want to tackle unemployment problems in China, then we might develop more low-end products that can provide jobs but not be as profit-making.”

For now, he concludes, the board remains focused on profitability.

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