Beijing orders state offices to replace foreign PCs and software - FT

Government offices and public institutions in China have been ordered to replace foreign computers and software within three years, Financial Times reported on Monday (Dec. 9). A major step in this direction is an order passed by the Chinese Communist Party, to push the government and public institutions to replace foreign-made computer equipment with local products.

News of the directive comes after the Trump administration moved in May to restrict USA companies from doing business with the Chinese telecom giant Huawei.

The Chinese directive would necessitate swapping out an estimated 20 million to 30 millions pieces of hardware with 30 percent of substitutions happening in 2020, 50 percent in 2021, and a further 30 percent in 2022, the Financial Times reports, citing a note from analysts at broker China Securities. Two employees from cyber security firms told the paper that government clients had described the policy.

The policy - which reportedly affects both hardware and software - could strike a big blow to American tech companies such as Microsoft, HP and Dell.


Analysts at Jefferies estimate that United States technology companies generate as much as $150bn a year in revenues from China, although much of that will come from private sector buyers. "Chinese people will no longer have any illusions about the steady use of USA technology".

But analysts say that it will be hard to replace software with domestic alternatives, since most software vendors develop products for popular US-made operating systems such as Microsoft's Windows and Apple's macOS. By the end of next year, 30 percent of foreign-made equipment in official use will be substituted with locally manufactured products from companies like Huawei and ZTE, among others.

China's homemade operating systems, such as Kylin OS, have a much smaller ecosystem of developers producing compatible software. It will also be challenging for government agencies to implement this change, considering that a majority of them use Lenovo PCs, which are powered by US-made hardware (Intel) and software (MS Windows).

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