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China aims to sweep shift from foreign tech to its own

The push comes after a test of domestic alternatives that was deemed a success, said the people, who asked not to be named because the details aren't public.

Bloomberg|
Updated: Dec 20, 2014, 04.46 AM IST
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BEIJING: China is aiming to purge most foreign technology from banks, the military, stateowned 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 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, Intel and Hewlett- Packard.

“The shift is real,” said Charlie Dai, a Beijing-based analyst for Forrester Research. “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 centers. 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 $182 billion last year, according to IDC. The US spent $656 billion, 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.
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