China's Quest to Oust Foreign Tech Firms
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China's Quest to Oust Foreign Tech Firms


China wants to eliminate the use of foreign technology in key sectors by 2020, Bloomberg reported Wednesday, citing people familiar with the campaign. The goal is to have domestic Chinese technologies in place in banks, state-owned enterprises, key government agencies, and the military.

The Bloomberg report merely solidifies other signs that China was looking to replace foreign technology firms with domestic ones, both for security reasons and as part of China’s push to ramp up domestic innovation in the high-tech sector. Back in February ,at the first meeting of the Internet security and informatization group, President Xi Jinping called developing domestic technologies and ensuring cyber-security “two wings of a bird” – equally crucial parts of China’s cyber strategy moving forward. To be a cyber power, Xi said, China must develop its own technology.

This became an urgent goal for China after revelations from Edward Snowden about U.S. cyber espionage on Chinese institutions. The Snowden leaks crystallized long-standing Chinese uneasiness about over-reliance on foreign firms like Microsoft and IBM for its technology needs. There’s also a growing sense of confidence in China that domestic alternatives are now realistic in a way they weren’t in the past. China released its first home-grown operating system this year with much fanfare. Bloomberg’s report notes that the recent drive to eliminate foreign tech by 2020 ramped up after a successful test where Microsoft’s Windows was replaced with China’s own NeoKylin OS and foreign servers were replaced with Chinese-made ones.

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China has shown signs of a new determination to oust foreign firms for months. Back in May, China targeted U.S. technology companies in what appeared to be a concerted attempt to lessen their market share. Beijing banned the use of Windows 8 on government computers and encouraged Chinese banks to switch away from IBM servers. Microsoft, Apple, Cisco, and other firms came under heavy fire as national security risks. These moves were partially in retaliation for the U.S. decision to indict five PLA officers on charges of economic espionage, but the Bloomberg report suggests the campaign against U.S. tech firms was only part of a larger strategy. More recently, Microsoft and Qualcomm became targets of a broader anti-monopoly campaign that some argued was a thinly-veiled pretext for hamstringing the operations of foreign firms within China.

For China, the push to replace foreign technology with domestic tech is a perfect fusion of national security interests and economic goals. Part of China’s economic reform involves transitioning away from being a top manufacturer for other global brands in favor of fostering Chinese innovation – especially in the technology sector. The Snowden leaks provided the perfect cover for a concerted push in this direction. The U.S. can complain about overt economic favoritism giving an unfair advantage to Chinese domestic firms, and could even potentially bring suit against China in the WTO. However, national security concerns provide a blanket excuse for China to justify its actions. After all, the U.S. itself all but blocked the Chinese firm Huawei from the U.S. market citing security concerns; China can argue it is simply returning the favor.

Eliminating foreign tech from key sectors by 2020 is an ambitious goal — but  even if China doesn’t make that deadline, it will eventually get there. Xi has placed an unusual emphasis on establishing China as a “cyber power,” both in terms of market share and in terms of political influence. The campaign to switch over to domestic technologies is one part of this, as is the new high-profile push for global acceptance of China’s “internet sovereignty” concept. With the emphasis Xi is putting on this goal, don’t look for this campaign to go away any time soon — bad news for Western companies like Microsoft and IBM, but great for their Chinese counterparts.

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