China’s Measures Amid US Tech Restrictions

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In 2022, China’s state asset regulator directed state-owned enterprises (SOEs) to transition to domestic office software systems by 2027.

China is intensifying its efforts to replace western technology with domestic alternatives amid increased U.S. restrictions on high-tech exports. Recent tenders from the government, military, and state-linked entities show a rapid rise in domestic replacements.

The number of bids from state-owned enterprises (SOEs), government, and military groups to replace foreign equipment doubled to 235 from 119, last year. These tenders’ value reached 156.9 million yuan, tripling the previous year’s figure.

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In 2022, China spent approximately 1.4 trillion yuan ($191 billion) on replacing foreign tech, a 16.2% increase from the previous year, as reported by IT research firm First New Voice.

This shift towards domestic technologies targets sensitive infrastructure, including a 4.4 million yuan tender in Gansu province for intelligence equipment and People’s Liberation Army tenders in Harbin and Xiamen to replace foreign computers.

Huawei stands out in the replacement trend, with its 2022 enterprise business reporting a 30% sales growth at 133 billion yuan. The software industry in China has experienced a shift, with major foreign database system providers seeing their market share decrease from 57.3% in 2018 to 27.3% in 2022.

However, China’s limited advanced chip-manufacturing abilities hinder its complete transition to domestic technology. While China has made strides in tech localization, Kendra Schaefer from Trivium China believes the country still faces challenges in entirely replacing foreign tech.

Experts, like Mo Jianlei from the Chinese Academy of Sciences, expressed China’s growing unease over potential hacking by foreign powers using Western equipment. Another research highlighted China’s reliance on the U.S.-made chips, including Qualcomm and platforms like iOS and Android. 

GlobalFoundries and Qualcomm

Foreign firms still hold significant positions in banking and telecoms database management, with 90% market share retained in banking database systems as of 2022.

Local replacements often fail to match the requirements of sectors like banking. Even if banks transition to local suppliers, like Lenovo, they still depend on critical components from western companies.

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