China orders replacement of all foreign hardware and software

Government offices and public institutions will need to replace as many as 30 million devices

The Chinese government - in a move apparently aimed at the USA - has issued a directive ordering all government offices and public institutions to remove foreign computer hard- and software within the next three years, the Financial Times reports.

The move mirrors attempts by the US government to ban Chinese companies from its supply chain and infrastructure. Major companies like Microsoft and Google have also stopped supplying firms like Huawei and ZTE, and recently the USA has been lobbying allies in Europe to freeze Huawei out of 5G infrastructure projects.

While this is the first official directive (that we know about) specifically limiting China's use of foreign technology, it is part of the country's ongoing efforts to increase takeup of domestic technology.

Chinese companies have increasingly been working to develop their own rival technologies, such as Huawei's HongMeng OS to replace Google's Android. That decision was driven in part by Google's decision to stop working with Huawei; but China's Cyber Security Law, which requires government agencies and critical infrastructure operators to use ‘secure and controllable' technology, has driven other domestic tech developments.

Broke China Securities told the FT that between the government would need to replace between 20 million and 30 million devices as a result of the command. The work will begin next year, and 30 per cent is expected to be complete by the end of 2020; 50 per cent in 2021; and the remaining 20 per cent in 2022. The policy has accordingly been nicknamed ‘3-5-2'.

The FT says that employees from two separate cyber-security firms about the policy, having heard about it from their government clients - despite the documents being confidential.

Analysts at Jefferies estimate that the Chinese market is worth about $150 billion a year to US companies. Although this is mostly due to customers in the private sector, vendors value government contracts - which are often large-scale and long-term - highly.

The software replacement will be one of the most significant replacements. Government offices already tend to use Lenovo computers, but software vendors most commonly develop for Windows or MacOS. Home-grown equivalents like Kylin OS have a much smaller developer ecosystem.