The China trade: the state lands the headquarters of a company from a country many Tar Heel manufacturers love to hate.

• Author: Speizer, Irwin
• Position: FEATURE

It all began in Beijing 22 years ago with 11 computer scientists working in a two-room house no bigger than a studio apartment. Now, Lenovo Group Ltd.'s new headquarters will be a suburban campus in Morrisville, a setting as foreign as it is distant--7,130 miles--from that bunkerlike building. Buying IBM Corp.'s personal-computing business was the first acquisition of a major U.S. operation by a Chinese company, and with it came about 1,800 jobs at IBM's Research Triangle Park campus, which is as much a high-tech icon in North Carolina as Lenovo's birthplace is in China.

These were jobs the state's political establishment was determined to keep, even if it meant cozying up to a country many Tar Heel manufacturers have tried to brand as a trade renegade. Never mind that Lenovo is partially owned by the Chinese government. Or that its takeover of IBM's PC business raises some of the national-security issues that recently scuttled a United Arab Emirates-owned company's bid to operate U.S. ports. Or even that Lenovo began cutting jobs after winning state and local incentives worth $14 million.

It has agreed to increase its North Carolina employment by up to 400 within 11 years, and for state officials the allure of new jobs--particularly high-tech ones--trumps other concerns. "If the question is, do you make an effort to secure 300 or 400 new jobs for a promising new industry that we expect to help sustain our economy in the future, there is not much of a question there," says Don Hobart, general counsel for the N.C. Department of Commerce. "Everyone recognizes the role that China's emergence in the world economy plays. It is an economic reality." As for security and trade issues, they're best left to the feds. Morrisville Mayor Jan Faulkner notes, "It was more important for us to look at keeping jobs here locally, not to worry as much about the specific China influence."

Globalization has been hard on the state's traditional industries--its textile mills and apparel plants, for example, have shed 170,000 jobs since 1997--and many manufacturers blame China. Textile and furniture groups lobby Washington for protection against the advantage afforded not just by China's cheap labor and lax workplace rules but by its currency, which the government keeps weak to make its exports even less expensive.

By buying cheaper foreign goods, U.S. consumers have helped build a huge trade imbalance. China, which has a $200 billion surplus with this country, has spent much of it on U.S. Treasury securities. Now Chinese companies are eyeing American assets, and the state Commerce Department, which has been sending trade missions to the Asian nation, is determined to snare some of that investment. In this case--and almost coincidentally--it snagged a global headquarters.

When Lenovo started talking to Armonk, N.Y.-based IBM about buying its PC division, Commerce officials fretted about the potential loss of Tar Heel jobs but began plotting how the state might benefit from a merger. IBM is the world's largest tech company, with $96 billion of...