UPDATED 19:14 EDT / DECEMBER 09 2019

37618003982_d0b59856a3_o POLICY

China orders government agencies to replace all foreign computer equipment within 3 years

China has issued a directive to all government offices and public institutions, telling them to replace the foreign computer hardware and software they use with homegrown alternatives within the next three years.

The order reportedly came down this spring, but its existence only became public today after being leaked to the Financial Times via a private Chinese cybersecurity firm.

The directive, which will go into effect in 2020, is known as “3-5-2,” the name referring to the percentage targets China has imposed on its various agencies. Under the directive, they’re to replace 30% of all foreign hardware and software they use within the first year, then an additional 50% in the second year, and finally the remaining 20% in 2022.

Privately owned Chinese firms are not required to adhere to the policy and will likely continue using foreign equipment because of the prohibitive costs of replacing their inventories, the Financial Times said.

Still, the policy is likely to impact U.S. firms such as Dell Technologies Inc., Hewlett-Packard Co. and Microsoft Corp., all of which are big suppliers to the Chinese government.

The Financial Times added that the order appears to have been given around the same time as Beijing ordered its military to create a new, custom operating system based on Linux to replace Microsoft’s Windows. China reportedly fears that American-made hardware and software could be vulnerable to hacking, putting its networks and systems at risk.

This isn’t the first time China has ordered a purge of western software, but previous initiatives were far more limited in scope. For example, five years ago China reportedly ordered government departments to wean themselves off Android and Windows, but that effort seems to have been aborted.

Things are different this time though, because of the increasingly strained relationship between China and U.S. under President Donald Trump’s administration. Indeed, it could be said that the U.S. brought this upon itself after moving to ban products from Chinese firms such as Huawei Technologies Co. Ltd. and ZTE Corp. in American infrastructure.

Constellation Research Inc. analyst Holger Mueller said the new directive from Beijing wasn’t a surprise given the escalating trade tensions between China and the U.S.

But questions remain about China’s ability to pull this off. Chinese firms such as Lenovo Group Holding Ltd. and Huawei should have no trouble replacing certain types of hardware such as servers and networking gear. But when it comes to software such as Windows and Android, few domestic alternatives exist, and those that do lack the same level of maturity and developer support. So the move could have lots of unintended consequences.

“From China’s perspective it is the only consequence it can take, but doing so will be hard in practice given for instance Microsoft’s dominant position in the desktop,” Mueller said.

Analyst Patrick Moorhead of Moor Insights & Strategy told SiliconANGLE the directive could well backfire on China because it simply isn’t ready to replace all of the foreign software it uses.

“First off, it’ll be hard to copy a Windows productivity experience and keep it fresh, which could lead to declining productivity,” Moorhead said. “It could also decrease security as the platform won’t be tested as much as Windows. In the end, I can see the U.S. administration going tit-for-tat, saying that if China won’t accept its productivity tools, then it won’t get access to the leading-edge silicon it can’t produce.”

Photo: Rudin Group/Fickr

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