China tells government and state firms to dump foreign PCs

China has told its central government agencies and state-backed companies to replace foreign-made PCs with Chinese-made ones within two years. This is one of Beijing’s most aggressive efforts yet to get rid of key foreign technology in its most sensitive parts.

People who knew about the plan said that after the week-long May break, employees were asked to turn in foreign PCs and get new ones made in the United States that run on operating software made in the United States. The exercise, which was ordered by the central government, is likely to lead to the replacement of at least 50 million PCs in the central government alone, they said, requesting anonymity because they were talking about a sensitive matter.

China has been trying for a decade to replace imported technology with homegrown alternatives. This decision is part of a wide-ranging effort that includes everything from semiconductors to phones and networking gear. It will probably have a direct effect on sales for HP Inc. and Dell Technologies Inc., which are the biggest PC brands in the country after Lenovo Group Ltd.

Lenovo made up for earlier losses and rose as much as 5 percent in Hong Kong on Friday morning. Software developer Kingsoft Corp. also made up for earlier losses and rose 3.3 percent. A Chinese company that makes servers, Inspur Electronic Information Industry Co., went up by 6% on mainland Chinese exchanges, while another company, Dawning Information Industry Co., went up by more than 4%.

Beijing is becoming more worried about information security and more confident in homegrown hardware. Lenovo, Huawei Technologies Co., and Inspur Ltd. are some of the biggest laptop and server makers in the world today, and local developers like Kingsoft and Standard Software have made great strides in office software against companies like Microsoft Corp. and Adobe Inc.

People said that the campaign will be expanded to provincial governments in the future and will still last for two years. Requests for comment sent by fax to the Ministry of Industry and Information Technology and the State Council Information Office were not answered.

Since at least ten years ago, China has been making sure that government agencies use IT products made in China. This is done by removing certain products from the government’s lists of things it wants to buy. In response, US IT giants like Hewlett Packard Enterprise Co. and Microsoft have set up joint ventures with companies backed by the Chinese government to get orders from the richest state-owned companies.

Chinese software and circuitry haven’t been good enough for this process for a long time, so users have had to rely on equipment from other countries. In the past few years, though, that has changed as local companies like Inspur and Lenovo have gained a larger share of the global market. However, their products still use cutting-edge American parts like processors from Intel Corp. or Advanced Micro Devices Inc. As of Friday, you could still buy HP machines on a website used by the central government to buy things, but it wasn’t clear if the transactions would go through.

People say that the latest central government order is likely to only cover PC brands and software and not hard-to-replace parts like Intel and AMD processors. China will try to get people to use operating systems based on Linux instead of Microsoft’s Windows. One person said that Standard Software in Shanghai is one of the best companies that makes these kinds of tools.

One person said that some agencies, like state-owned media and cybersecurity groups, may still be able to buy high-tech foreign equipment with special permits, just like they have in the past. The person said that the permit system could be made stricter in the future. Bloomberg News

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