China's Hu starts U.S. trip with Microsoft visit

/ Source: Financial Times

Hu Jintao, China's president, opened his four-day U.S. trip on Tuesday with a tour of the Microsoft campus in Seattle, a visit the company hopes marks the beginning of a sea change in Beijing on Intellectual Property Rights.

In a statement handed out on arrival, Mr. Hu said China and the U.S., as two great nations, "share broad common interests, have a solid foundation for cooperation and shoulder joint responsibility for promoting world peace and development."

Mr. Hu was later due to attend a dinner for 100 guests at the nearby home of Bill Gates, the Microsoft chairman, hosted by the governor of Washington state, Christine Gregoire, and attended by various senior Chinese officials and U.S. dignitaries. (MSNBC is a Microsoft-NBC joint venture.)

Mr. Hu will also visit the Boeing factory just outside of Seattle on Wednesday, before heading to Washington for a summit meeting with George W. Bush on Thursday.

Mr. Hu's friendly reception in Seattle from some of the U.S.'s biggest and most international businesses will be a welcome contrast for the Chinese leader to a much more critical reception in Washington.

China has made a series of announcements on IPR issues in the lead-up to Mr. Hu's visit, issuing a directive for computers to be pre-loaded with legitimate software and for governments not use pirated versions.

The announcements follow a period of sustained pressure from the U.S. on IPR, urged on by companies like Microsoft, for whom piracy has been the biggest obstacle to establishing a viable business in China, which should be one of its largest markets.

However, Microsoft executives say China has begun to strengthen its position on the IPR issue because it now believes stronger protection is in the interests of its own economic development. "If it only helped companies like Microsoft, you would not see them embracing it all that enthusiastically," said Craig Mundie, Microsoft's chief technical officer.

"I believe that for more than a year that Chinese leaders have come across a threshold where they recognize that IPR is critical to the country's own future requirements."

Mr. Mundie said Microsoft was not so "naïve" as to think the situation in China would change overnight, but that the recent announcements represented a "quantum leap" on the previous seven to eight years.

He said that China remained a priority for Microsoft, both as a market and as a source of technology into the future market, despite the IPR difficulties.

"That's why the company has been investing there even though the climate for our business has been sub-optimal," Mr. Mundie said.

In a ceremony at the Seattle headquarters on Monday, Lenovo, China's top computer maker and the owner of IBM's PC division, announced an agreement to sell computers in China with Microsoft software pre-installed.

The agreement is estimated to be worth $1.2 billion over the next 12 months.

Yang Yuanqing, the Lenovo chairman, said the new policy had already had a dramatic impact in China, with 70 percent of customers now buying computers preloaded with Windows XP, up from 10 percent before November.

In his hour-long visit to the Microsoft campus, Mr. Hu will be given a tour of the company's display home of the future and also see various "avant-garde" computer applications. "Hosting heads of state is something that we have quite a few opportunities ties to do," said Mr. Mundie.