IBM's $1.75bn move to sell off its PC business to Chinese manufacturer Lenovo may be scuppered by US regulatory concerns about national security.

Members of the committee on foreign investments in the US are worried that China might use the IBM facilities in North Carolina to engage in industrial espionage, feeding stolen technologies to the military.

The committee's job is to examine any potential threats to national security that may arise from the sale of a US firm to a foreign company.

According to a report in Bloomberg, IBM and Lenovo need the approval of the committee in order to avoid a formal investigation and the need for clearance by US president George Bush.

The US has blocked sales to Chinese firms in the past on similar grounds.

In 2003, Global Crossing failed to obtain approval to sell its telecommunications network to Hong Kong-based Hutchinson Whampoa.

IBM's decision to sell off its PC unit and exit the market reflects the changing status of IT firms these days, with companies either focusing on developing a high-volume low-margin business or moving into services.

In November, analyst firm Gartner forecast that slower growth rates and reduced profit margins in the PC industry will result in vendor consolidation, with three of the top 10 PC manufacturers exiting the market by 2007.

For Lenovo, which until the announcement of the deal was an unknown brand outside of its home market in China, the agreement gives it an opportunity to use its low-cost assembly strengths to take the fight to market leader Dell.

Under the terms of the deal it has struck, Lenovo can use the IBM brand for five years before introducing 'Lenovo ThinkPads'.