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February 26, 2015

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Government drops foreign brands

CHINA has dropped some of the world’s leading technology brands from its approved state purchase lists, while approving thousands more locally made products.

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

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 fewer 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.

The CGPC list is approved by the Ministry of Finance, the official said. It 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.

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

An Intel spokesman said it had frequent conversations at various levels of the US and Chinese governments, but did not give further details. Apple declined to comment, and Citrix was not immediately available.

Industry insiders also see in the changing profile of the CGPC list a wider strategic goal to help Chinese tech firms get a bigger slice of China’s information and communications technology market, which is tipped to grow 11.4 percent to US$465.6 billion this year, according to research firm IDC.

Wang Zhihai, president and CEO of Beijing Wondersoft, which provides information security products, said the market in China was fair, especially compared with the United States, where China’s Huawei Technologies was unable to do business due to US security concerns.

Local companies are also bound by the same cybersecurity laws that US companies were objecting to, he added.

The danger for China, say experts, is it could become dependent on domestic technology which is inferior to foreign market leaders and vulnerable to cyberattack.

Some of those benefiting from policies encouraging domestic procurement accept that Chinese companies trail foreign competitors in the security sphere.

“In China, information security compared to international levels is still very far behind; the entire understanding of it is behind,” said Wang.

But Wang, like the government, is taking the long view. “In 10 or more years, that’s when we should be there.”


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