BEIJING – China has dropped several top U.S. technology companies, including Cisco and Apple, from a list of products that are approved for state purchases, amid a widening rift about cyber-space between the two countries.
The move, reported by the Reuters news agency Thursday, follows Edward Snowden’s revelations about a massive U.S. cyber-espionage program codenamed Prism, and comes as China is energetically bolstering what it calls its “cyber-sovereignty.”
It can also be seen as part of the wider cyber-war between China and the United States — a tit-for-tat response to the U.S. government’s accusations that the Chinese army was spying on American companies. Those U.S. accusations ruptured a dialogue about cyber issues between the two countries.
There was probably also an element of protectionism behind the move: Government procurement in China often tends to favor local companies and this can be seen as a way of supporting China’s technology sector.
A Reuters analysis of Central Government Procurement Center lists showed that the chief casualty was U.S. network equipment maker Cisco Systems, which in 2012 counted 60 products listed, but by late 2014 had none.
Other companies dropped included Apple, Intel Corp’s security software firm McAfee and network and server software firm Citrix Systems. Hewlett-Packard and Dell products remained on the list.
“The main reason for dropping foreign brands is out of national security. It’s the effect of Snowden and Prism,” said Mei Xinyu, a researcher with the Ministry of Commerce. “When it comes to national security, no country should let their guard down.”
But Mei said Apple may have also suffered because its products tend to be much more expensive than Chinese equivalents.
“Apple products are rare on government procurement lists to begin with, and even more so now that there’s this anti-corruption campaign going on,” he said. “What would the public say if they see our officials use Apple products?”
James Zimmerman, chairman of The American Chamber of Commerce in the People’s Republic of China said that in the high-tech sector in particular, “restrictive policies and standards made it more difficult for foreign companies to participate in government procurement.”
“AmCham China urges the Chinese government to not apply these standards to all government procurement, but only to those projects and areas where such standards are essential, he said. “We also recommend that the choice of technologies in government procurement should be performance based and technology neutral in terms of IP origins.”
The list covers regular spending by the Chinese central government. It is not binding on local governments, state-owned firms or the military, which runs its own system of procurement.
In 2013, Snowden’s revealed the existence of a global cyber-surveillance program run by the National Security Agency with the cooperation of European governments and telecom companies.
But the atmosphere between the United States and China deteriorated sharply last year after the Justice Department indicted five People’s Liberation Army members for spying.
Noting declining earnings in China, Cisco chief executive John Chambers said in late 2013 that Snowden’s revelations and “the challenging political dynamics” in China had hurt business there.
“We have previously acknowledged that geopolitical concerns have impacted our business in China,” a spokesman for Cisco told Reuters. Apple did not immediately respond to requests for comment.
Reuters reported that the number of foreign tech brands on the procurement list fell by a third, while less than half of those with security-related products survived the cull. The European Chamber of Commerce said it was “concerned”, and was analyzing the impact it might have on its members.
As part of its own national security policy, China has been building up its own cyber-defence systems, bolstering its own system of Internet censorship known as the Great Firewall and demanding that foreign technology companies that operate inside China play by its rules.
Last month, U.S. business and technology groups — including the American Chamber of Commerce in China and the U.S. Chamber of Commerce — wrote to the Chinese government to protest new rules that would force companies in the banking and telecoms sectors to hand over secret source code, and use only “secure and controllable” IT services — in other words, services the Chinese government can monitor.
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By: Simon Denyer, February 26, 2015 for Washington Post