CCP Orders Government Agencies, State-Controlled Firms To Dump Foreign PCs & Software

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by Tyler Durden
Friday, May 06, 2022 - 03:40 PM

Although it has been overshadowed by the conflict in Ukraine, the rift between the US and China has remained during the Biden Administration (as the White House has continued to supply arms to Taiwan in defiance of Beijing's demands that no foreign entities interfere).

So, in the latest demonstration of distrust, Beijing has ordered all government agencies and state-controlled corporations (which is to say, most companies in China) to dump all foreign-branded PCs, and replace them with Chinese-made products. What's more, the new PCs must run on operating systems developed domestically, according to the order.

Here's more from Bloomberg:

Staff were asked after the week-long May break to turn in foreign PCs for local alternatives that run on operating software developed domestically, people familiar with the plan said. The exercise, which was mandated by central government authorities, is likely to eventually replace at least 50 million PCs on a central-government level alone, they said, asking to remain anonymous discussing a sensitive matter.

The decision advances China’s decade-long campaign to replace imported technology with local alternatives, a sweeping effort to reduce its dependence on geopolitical rivals such as the U.S. for everything from semiconductors to servers and phones. It’s likely to directly affect sales by HP Inc. and Dell Technologies Inc., the country’s biggest PC brands after local champion Lenovo Group Ltd.

Chinese laptop and software stocks rallied on the news. Lenovo (now owned by a Chinese entity after being bought years ago from IBM) erased losses to climb as much as 5% on Friday in Hong Kong, while software developer Kingsoft gained 3.3% on the news, erasing earlier losses.

On mainland Chinese exchanges, server maker Inspur gained 6% while peer Dawning Information Industry jumped more than 4%. Inspur Software, an affiliate of the Inspur group, and China National Software & Service, both soared their daily 10% limits.

This policy of replacing foreign software and hardware with domestic alternatives is nothing new for the Chinese, but the effort intensified after the Trump Administration hamstrung Huawei with a raft of sanctions and the Commerce Department 'blacklist'.

But the initiative accelerated after 2021 when the Chinese central government quietly empowered a government-backed organization to vet and approve local suppliers, blocking foreign vendors from sensitive high-tech industries from the cloud to semiconductors.

Fortunately for the Chinese, many of the world’s biggest laptop and server makers today include domestic firms, including Lenovo, Huawei and Inspur, while local developers such as Kingsoft and Standard Software have made rapid strides in office software against the likes of Microsoft and Adobe.