China to ban foreign software and hardware from state offices

Beijing’s latest policy is seen as one of the most direct moves against US technology firms

China has reportedly ordered all foreign PC hardware and operating systems to be replaced in the next three years, intensifying an ongoing tech war. The country has attempted this sort of thing before halfheartedly, but this is the most serious effort yet to isolate itself from the influence of the western technology sector.

According to a Financial Times report citing Chinese tech analysts, the order came from high up in the Chinese government earlier this year. The goal is not simply to replace American and European software and operating systems with Chinese equivalents, but the hardware they run on as well. The policy has been dubbed “3-5-2” because the replacement of the technology will happen at a pace of 30% in 2020, 50% in 2021, and 20% in 2022, the newspaper said, citing a note from brokerage firm China Securities. 

China has previously ordered purges of western software, but they were more limited or related to certain security issues; there were efforts five years ago to wean the country off Android and Windows, but ultimately they proved abortive. This time could very easily be different. The relationship between the US and China has become strained, to say the least, especially in the world of tech, where the two countries have shifted from earnest rivals to real adversaries and miscellaneous other policy decisions have widened the rift.

Yet, the three-year "3-5-2" plan is ambitious, to say the least. Analysts there estimate that 20 million to 30 million pieces of foreign equipment need to be replaced in China. Nevertheless, it isn't as simple as trading out HP machines for Chinese-manufactured ones. The components and software must be Chinese as well, so Intel and AMD processors are out, as are Nvidia GPUs, ARM architectures, Sony image processors and so on.

This won't be quite the shock it seems, however, as many Chinese companies have been preparing for this eventuality for years. China has made its desire to establish independence from US companies especially quite clear and many state-backed enterprises have been unable to use US suppliers for some time.

Even so, Chinese equivalents to products like Windows and Android have nowhere near the level of maturity and developer support necessary to swap them out with no consequences. And the ban may hamstring other major efforts like the country's push to dominate the AI ecosystem. If Chinese government-backed researchers are unable to use the same tools as their academic and private counterparts elsewhere in the world, their results will almost certainly suffer.

The specifics of the plan are still confidential but will likely trickle out as they begin to be enforced. But this is likely to be a major driver of industry dynamics for several years as suppliers, developers and manufacturers all learn to navigate the divergent markets.

Beijing’s move comes against the backdrop of the ongoing US-China trade war in which technology has been front and center. China’s technology firms have been the target of US pressure. Earlier this year, Huawei was placed on a US blacklist which stopped American firms doing business with the Chinese telecom networking giant. Washington expanded its blacklist in October to include a number of Chinese surveillance firms like Hikvision, one of the world’s biggest companies for such technology.

A provision of a US law known as the National Defense Authorisation Act also prohibits executive government agencies from procuring telecommunications hardware made by Huawei and another Chinese firm, ZTE.

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