More domestic players to fill tech void

More domestic players to fill tech void

China is set to drop government purchases of foreign technology products as part of the national strategy to ensure information safety, according to experts.

Observers said more local brands will be added to the government procurement list in coming years to fill the void left by overseas competitors such as IBM, Microsoft and Cisco Systems.

IT products produced by IBM and Microsoft remain "active for purchase" but no Cisco equipment is available, according to information on the Central Government Procurement Center's website. Cisco had 60 products on the State procurement list in 2012, according to a Reuters report.

A long list of domestic companies has entered the highly profitable sector in recent years, including giants such as ZTE Corp, Lenovo Group and Huawei Technologies Co and an array of small players.

Companies including IBM, Cisco and Intel Corp did not comment directly on the issue on Thursday.

Cisco said that geopolitical concerns have had an impact on its business, while Intel said it is working with the Chinese government on many levels, without providing details. The procurement centre also did not comment.

Zuo Xiaodong, vice-president of the China Information Security Research Institute, a government think tank, said it is clear China wants more domestic IT products to replace overseas technology, over which the country has no control.

"Using more products made by Chinese companies in critical sectors makes Beijing feel safer about information security," Zuo said.

Late last year, media reports said China will drop overseas IT products and services from government procurement by 2020.

Zuo said regulators have no clear time frame for abandoning foreign products, but the country is clearly in favour of domestic players.

Miao Wei, chief of the Ministry of Industry and Information Technology, said self-developed IT products are critical to improving information security in China.

Foreign Ministry spokesman Hong Lei said on Thursday that China welcomes overseas enterprises exploring business in the country, as long as they abide by Chinese laws.

Industry insiders said China may ask IT companies for critical technologies, such as source codes, before allowing them to join government-backed projects - including those from State-owned enterprises.

Kitty Fok, director of research firm IDC China, said more overseas IT companies will seek partnerships with local players to tap into the government procurement market.

"China is not the same as it was a decade ago, and a business model based on simply selling pre-existing products to the Chinese market is not necessarily going to work," Fok said.

Tighter controls on information technology products used in the financial sector may pose more hurdles for overseas companies in China, industry sources said on Monday.

Overseas companies like IBM Corp and EMC Corp will need to fully comply with the regulations if they want to win deals in the country, said the sources.

According to a report published in the Shanghai-based newspaper China Business News, the China Banking Regulatory Commission, the nation's banking regulator, is conducting a full-scale research across Chinese banks and large financial institutions to gauge the information security conditions. The research involves IT hardware, software and services, it said.

The government has indicated that it or other suitable organisations should have control over the technology used in financial organisations. According to a document released by the CBRC last year, China plans to have at least 75 per cent of the IT products used in the financial sector under its control.

A source close to the commission said the regulator would also check the actual use of domestic software by lenders while assessing the safety of banks' information networks.

Several top Chinese lenders, including Bank of China Ltd, did not reply to China Daily's requests for comment.

IBM, EMC, Microsoft Corp and Hewlett-Packard Co are among the biggest overseas IT providers in China. A number of the products, including Microsoft's Windows 8.1 operating system, have been banned from government procurement projects because of security concerns.

Chinese vendors, by contrast, are making aggressive moves by trying to fill the void left by the foreign brands.

ZTE Corp, the communications equipment provider, and Inspur Group Ltd, a maker of servers, have announced "breakthroughs" in self-developed IT products that can be used in critical industries including banking.

The only way for overseas IT companies to win government procurement deals is to fully cooperate with the government and disclose core operating data to regulators, said Zuo Xiaodong, vice-president of the China Information Security Research Institute.

"The meaning of making a safe and controllable IT environment is to better protect national security rather than ousting foreign firms," said Zuo, who co-authored the first security standard for cloud-computing industry.

Gene Cao, a senior analyst at Forrester Research Inc, said that being controllable does not necessarily exclude overseas vendors from government procurement.

"An example is recent media reports stating Apple Inc CEO Tim Cook's willingness to accept security checks. If Apple's products pass the checks, they will be eligible for government procurements," Cao said.

Cisco Systems Inc said it will take "active measures" to safeguard product safety and reliability after a Chinese government announcement to impose tighter cyber security checks on overseas information technology providers.

The California-based IT firm was the first overseas company to directly respond to a government decision that IT products, services and suppliers related to national security and key public interest should submit to a review programme before being put into use.

Cisco is planning to work with the US government and industry contacts to learn more about the new regulation and any implications for IT companies in China, the company said in an e-mail reply to China Daily.

"We have served our customers in China for 20 years and look forward to continuing to so do. Our products are reviewed by customers and governments around the world and they meet the highest global, quality and security requirements and standards," it added.

Gene Cao, senior analyst at industry consultant Forrester Research Inc, believed a cross-industry review project could hurt overseas providers' business in the country.

"More approval processes caused by the new policy will make the Chinese government and State-owned enterprises more cautious when identifying vendors' qualifications and selection," Cao said.

The Chinese government and SOEs gradually gradually lost their willington for IT purchases from foreign tech vendors in the past two years, he added.

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