China said to summon banks to stress push against foreign tech

[BEIJING] Chinese regulators summoned bank officials for a meeting this month to stress the need to carry out a nationwide directive to cut China's reliance on foreign technology, said people familiar with the matter.

In the Jan 15 meeting, the China Banking Regulatory Commission suggested lenders not buy new mainframe computers in 2015 and draft plans to replace the ones they now have, said the people, who asked not to be identified because the meeting was private. A senior CBRC official said in November banks rely on foreign brands for 80 per cent of their core servers and systems.

The directive is a follow-up on a broad national strategy, reported by Bloomberg News in December, to purge most foreign technology for banks, state-owned enterprises and the military by 2020. The move, which would grant reprieve to foreign companies that turn over their core technology, threatens sales for vendors including Microsoft, IBM Corp. and Cisco Systems.

The CBRC told bank officials in the meeting to think of ways to use more domestic products or foreign brands that comply with government demands to share core technology or give China's security inspectors access to their products, the people said. They said banks should also draft a five-year plan on making the transition.

China's displacement plan and its intention to start a new national security review mechanism have raised concern among US business groups.

In a letter Jan 28, the US Chamber of Commerce and 17 other groups called for urgent talks with Chinese Communist Party officials on the "growing trend" of policies toward using Chinese-developed or "secure and controllable" information communications technology.

"Our concern is not with the goal of enhancing security, but with the means to reach it," said the letter to the party's Central Leading Group for Cyberspace Affairs.

"An overly broad, opaque, discriminatory approach to cybersecurity policy that restricts global Internet and ICT products and services would ultimately isolate Chinese ICT firms from the global marketplace and weaken cybersecurity." The CBRC didn't respond to a faxed request for comment on Thursday.

China has benefited from global integration through the World Trade Organization, the letter said. The country's share of information, communication and technology exports rose to 30 per cent in 2012 from 2 per cent in 1996, it said.

China has carried out a trial to test whether NeoKylin, a Linux-based operating system from China Standard Software Co, can substitute for Windows and servers made by Inspur Electronic Information Industry Co can replace IBM's, people familiar with the matter said in December.

Servers are one technology product in which Chinese brands have seen sales surge while foreign providers posted lower shipments. In the third quarter of last year, Hewlett-Packard Co server shipments fell by 14.9 per cent and IBM's fell by 15 per cent, according to the research group Gartner Inc. At the same time, shipments by Inspur rose 81.9 per cent, while Huawei Technologies Co posted an increase of 34.3 per cent.

"In line with China's World Trade Organization commitments, it is of critical importance that policies be developed in a transparent and open manner," the US business groups said in the letter.

Business groups signing the message letter include The Software Alliance, the Semiconductor Industry Association, the Telecommunications Industry Association and the US-China Business Council.

BLOOMBERG