China drops leading tech brands for certain 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. The lists cover smaller-scale direct purchases of technology equipment, and central government bodies can only buy items not on the list as part of a competitive tender process. Chief casualty was U.S. network equipment maker Cisco Systems Inc, which in 2012 counted 60 products on the Central Government Procurement Center’s (CGPC) list, but had none left by late 2014, 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 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 the fact that domestic security technology firms offered more product guarantees than overseas rivals. China’s change of tack coincided with leaks by former U.S. National Security Agency (NSA) contractor Edward Snowden in mid-2013 that exposed several global surveillance programmes, 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.” LIMITED ­OPPORTUNITIES Cybersecurity has been a significant irritant in U.S.-China ties, with both sides accusing the other of abuses. U.S. tech groups wrote last month to the Chinese administration complaining about 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. Orders are allowed up to the value of 500 000 yuan (US$79,754), according to the CGPC website. 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. “(Exclusion) obviously would limit one’s opportunities. It wouldn’t eliminate them,” said Scott Kennedy, director of the Research Center for Chinese Politics and ­Business at Indiana University. -Nampa / Reuters