China drops leading technology brands for state purchases

China drops leading technology brands for state purchases

BEIJING - China has dropped some of the world's leading technology brands from its approved state purchase lists, while approving thousands more locally made products, in what some say is a response to revelations of widespread Western cybersurveillance.

Others put the shift down to a protectionist impulse to shield China's domestic technology industry from competition.

Chief casualty is US network equipment maker Cisco Systems Inc, which in 2012 counted 60 products on the Central Government Procurement Center's (CGPC) list, but by late 2014 had none, a Reuters analysis of official data shows.

Smartphone and PC maker Apple Inc has also been dropped over the period, along with Intel Corp's security software firm McAfee and network and server software firm Citrix Systems.

The number of products on the list, which covers regular spending by central ministries, jumped by more than 2,000 in two years to just under 5,000, but the increase is almost entirely due to local makers.

The number of approved foreign tech brands fell by a third, while less than half of those with security-related products survived the cull.

An official at the procurement agency said there were many reasons why local makers might be preferred, including sheer weight of numbers and the fact that domestic security technology firms offered more product guarantees than overseas rivals.

China's change of tack coincided with leaks by former US National Security Agency (NSA) contractor Edward Snowden in mid-2013 that exposed several global surveillance programme, many of them run by the NSA with the cooperation of telecom companies and European governments.

"The Snowden incident, it's become a real concern, especially for top leaders," said Tu Xinquan, Associate Director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing. "In some sense the American government has some responsibility for that; (China's) concerns have some legitimacy."

Cybersecurity has been a significant irritant in US-China ties, with both sides accusing the other of abuses.

US tech groups wrote last month to the Chinese administration complaining about some of its new cybersecurity regulations, some of which force technology vendors to Chinese banks to hand over secret source code and adopt Chinese encryption algorithms.

The CGPC list, which details products by brand and type, is approved by China's Ministry of Finance, the CGPC official said. The list does not detail what quantity of a product has been purchased, and does not bind local government or state-owned enterprises, nor the military, which runs its own system of procurement approval.

The Ministry of Finance declined immediate comment.

"We have previously acknowledged that geopolitical concerns have impacted our business in certain emerging markets," said a Cisco spokesman.

An Intel spokesman said the company had frequent conversations at various levels of the US and Chinese governments, but did not provide further details.

Apple declined to comment, and Citrix was not immediately available to comment.

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