(MENAFN- Gulf Times) China is aiming to purge most foreign technology from banks, the military, state-owned enterprises and key government agencies by 2020, stepping up efforts to shift to Chinese suppliers, according to people familiar with the effort.
The push comes after a test of domestic alternatives in the northeastern city of Siping that was deemed a success, said the people, who asked not to be named because the details aren't public. Workers there replaced Microsoft Corp's Windows with a homegrown operating system called NeoKylin and swapped foreign servers for ones made by China's Inspur Group, they said.
The plan for changes in four segments of the economy is driven by national security concerns and marks an increasingly determined move away from foreign suppliers under President Xi Jinping, the people said. The campaign could have lasting consequences for US companies including Cisco Systems, International Business Machines Corp, Intel Corp and Hewlett- Packard Co.
"The shift is real," said Charlie Dai, a Beijing-based analyst for Forrester Research Inc "We have seen emerging cases of replacing foreign products at all layers from application, middleware down to the infrastructure software and hardware."
China is moving to bolster its technology sector after Edward Snowden revealed widespread spying by the US National Security Agency and accused the intelligence service of hacking into the computers of Tsinghua University, one of the China's top research centres. In February, Xi called for faster development of the industry at the first meeting of his Internet security panel.
Foreign suppliers may be able to avoid replacement if they share their core technology or give China's security inspectors access to their products, the people said. The technology may then be seen as safe and controllable, they said.
China ranks second behind the US in technology spending, with outlays rising 8.1% to $182bn last year, according to research firm IDC. The US spent $656bn, a 4.2% increase over 2012.
The push to develop local suppliers comes as Chinese regulators have pursued anti-trust probes against western companies, including Microsoft and Qualcomm. Recent months have seen Microsoft's China offices raided, Windows 8 banned from government computers and Apple iPads excluded from procurement lists.
"I see a trade war happening. This could get ugly fast, and it has," said Ray Mota, chief executive officer of Gilbert, Arizona-based ACG Research, who expects the issue to result in direct talks between the US and China. "It's not going to be a technology discussion. It's going to be a political discussion."
In September, the China Banking Regulatory Commission ordered banks and finance agencies to ensure that at least 75% of their computer systems used safe technology by 2019. The regulator called on financial institutions to dedicate at least 5% of their IT budgets towards the goal.
While the CBRC policy doesn't make a distinction between foreign and domestic products, it says banks must favour companies who share their "core knowledge and key technology." It also cautions banks from relying too heavily on one supplier.
Chinese firms, like Huawei Technologies Co and ZTE Corp, have already begun to gain local market share at foreign rivals' expense.
Inspur Group's Inspur Electronic Information Industry Co rose as much as 2.6% in Shenzhen before closing 1.5% higher at 39.54 yuan.
Beijing Orient National Communication Science & Technology Co, a provider of software products to phone companies and financial institutions, climbed 9.9% to the highest since its January 2011 listing. Sinodata Co, which provides technology services to the banking sector, added 9.8%.
About 80% of banks' core servers and systems are made by foreign brands, Yan Qingmin, a CBRC vice chairman, said November 27 at a conference in Beijing sponsored by the news magazine Caijing.
"Most of China's financial IT systems are from foreign countries," Yan said. "From the perspective of national security, it poses potential threats to us." The CBRC may start accounting for banks' use of Chinese technology in its regulatory reviews, the Shanghai Securities News reported.
Xi's Central Military Commission issued a similar, although less detailed, order in October, according to a report in the party-run People's Liberation Army Daily. That document described information security as key to winning battles. Intel, Microsoft, HP, Cisco and Qualcomm declined to comment. IBM said it isn't aware of any Chinese government policy against using its servers in the banking industry.
Industrial & Commercial Bank of China, the country's biggest bank, deployed a new IBM mainframe in August, the two companies said.
Chinese companies have faced similar pressure overseas. A 2012 US Congressional report said Huawei and ZTE, the country's largest phone-equipment makers, provide opportunities for Chinese spies to tamper with US communications networks. Huawei has since been shut out from several US deals.
In May, the US Department of Justice accused five men in the People's Liberation Army of allegedly hacking into the computer systems of US companies to steal information. The Chinese government called the charges "absurd."
The orders from Chinese banking and military commissions coincided with the trial of domestic computer systems in Siping, a city of 3.4mn people in Jilin province. Other cities and agencies in Jilin will now begin testing whether NeoKylin, a Linux-based operating system from China Standard Software Co, can substitute for Windows and servers made by Inspur can replace IBM's, the two people familiar with the plan said.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.