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China bans foreign computing kit from government contracts

All government offices and public institutions must eliminate foreign hardware and software within three years, according to a leaked directive dubbed 3-5-2

The Chinese government has ordered every government body and public institution in the country to remove foreign-made computing hardware and software from their IT stacks by 2022, according to a leaked directive from the Communist Party Central Office.

In what many are already reading as a new front in a worsening technological cold war between the US and China, the directive could represent a serious blow to some of Silicon Valley’s biggest names, including HP Inc and Microsoft, shutting them out of China’s multibillion-dollar public sector market altogether.

According to the Financial Times, which first reported the story, analysts at China Securities, a Beijing-based investment bank, brokerage and asset management practice, have estimated that some 20 to 30 million items of equipment will need to be replaced under the directive.

This was confirmed by two unnamed employees from different cyber security firms, who told the FT that their government clients in China had informed them about the new policy.

China Securities, meanwhile, reported that the replacement process will begin in 2020, with targets of 30% removal in the next 12 months, 50% in 2021, and 20% in 2022 – the policy has been informally dubbed 3-5-2 because of this.

It is unclear what the directive would mean for the supply chains of China-owned businesses such as Lenovo, which uses components from suppliers such as Intel as a matter of course.

It will also present a challenge to the Chinese IT industry from a software perspective – because so many companies develop primarily for Windows, they will now need to pivot to an as-yet undefined alternative.

China had previously announced plans to develop its own computer operating system (OS) specifically for its military, and networking and communications products and services supplier Huawei has independently developed its own mobile OS to deploy should it be frozen out of Google’s Android ecosystem. However, this raises further questions, such as whether or the military product would be ready in time, or if Huawei’s product would be suitable.

The directive almost certainly relates to US sanctions placed on multiple Chinese companies – the most high-profile of which is networking and communications products and services supplier Huawei – forbidding US businesses from working with them.

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In remarks made to journalists at an event earlier this year, John Sawers, former head of the UK’s MI6, said that as a highly visible business with global reach, Beijing takes the preservation of Huawei very seriously and is likely to make its access to the US market a non-negotiable item in any trade talks with president Trump.

However, Huawei has, by and large, shrugged off its ban, saying that the restrictions on its ability to work in the US do not meaningfully affect it, and advancing the argument that by excluding it, the US government is only acting against the interests of its own citizens.

The firm recently mounted a legal challenge in the US to a part of the ban that stops small communications service providers in the US from accessing a support fund run by the Federal Communications Commission, the US equivalent of the UK’s Ofcom.

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