China Orders Government, State Firms to Dump Foreign PCs

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.

Bloomberg News

May 6, 2022

2 Min Read
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(Bloomberg) -- China has ordered central government agencies and state-backed corporations to replace foreign-branded personal computers with domestic alternatives within two years, marking one of Beijing’s most aggressive efforts so far to eradicate key overseas technology from within its most sensitive organs.

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. Shares of HP and Dell were both down about 2.5% in New York Friday morning.   

Lenovo erased losses to climb as much as 5% on Friday in Hong Kong, while software developer Kingsoft Corp. also recouped its earlier decline to gain as much as 3.3%. On mainland Chinese exchanges, Inspur Electronic Information Industry Co., a server maker, gained 6% while peer Dawning Information Industry Co. jumped more than 4%. Inspur Software Co., an affiliate of the Inspur group, and China National Software & Service Co. both soared their daily 10% limits.

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The push to replace foreign suppliers is part of a longstanding effort to wean China off its reliance on American technology -- a vulnerability exposed after sanctions against companies like Huawei Technologies Co. hammered local firms and businesses. That initiative has accelerated since 2021, when the Chinese central government quietly empowered a secretive government-backed organization to vet and approve local suppliers in sensitive areas from cloud to semiconductors.

The latest PC replacement project also reflects Beijing’s growing concerns around information security as well as a confidence in homegrown hardware: the world’s biggest laptop and server makers today include Lenovo, Huawei and Inspur Ltd., while local developers such as Kingsoft and Standard Software have made rapid strides in office software against the likes of Microsoft Corp. and Adobe Inc.

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The campaign will be extended to provincial governments later and also abide by the two-year timeframe, the people said. The Ministry of Industry and Information Technology and State Council Information Office didn’t respond to faxed requests for comment.

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