For Neusoft, one of China's biggest software solutions providers,
that includes selling more networking products and information
security software to government and state-owned clients, while
introducing higher-value integrated hardware and software packages
and consulting services.
"It's understandable for a country to strengthen its information
security and cyber security while maintaining its independence and
control," Lu Zhaoxia, senior vice president of Neusoft told Reuters.
"In the U.S. and Japan, core systems are all domestic."
Based in the northeastern city of Shenyang, Neusoft's clients
include some of China's biggest state-owned conglomerates such as
State Grid Corp of China [STGRD.UL] and the country's three big
The latest row between Beijing and Washington has brightened the
outlook for Chinese software firms, which have already seen improved
sales and share prices since U.S. spying revelations a year ago by
Edward Snowden, a former U.S. National Security Agency (NSA)
contractor. Snowden also claimed the NSA hacked into critical
network infrastructure at universities in China and Hong Kong.
Neusoft shares have risen 15 percent to 2-month highs since May 19
when the U.S. Justice Department charged five Chinese military
officers, accusing them of hacking American companies to steal trade
While Lu emphasized Neusoft's commitment to innovation – the firm
employs 20,000 workers and over the last 5 years has nearly doubled
revenue to 7.5 billion yuan ($1.2 billion), even as profit margins
narrowed sharply – the company's stock price has risen around 60
percent since Snowden's revelations last May.
Insigma Technology Co Ltd, Beijing Teamsun Technology Co Ltd and
Inspur Software Co Ltd share prices have also spiked higher in the
last week, while shares in Shenzhen Kingdom Technology Co Ltd,
Yonyou Software Co Ltd and DHC Software Co Ltd have soared 200-300
percent in the past year.
"Relevant government policies are definitely positive for the
development of our company," said Gao Han, an investor relations
official at DHC Software, which sells its software and services to
big and mid-sized state firms, including PetroChina, Sinopec and
The U.S. government indictment has sparked outrage in China and
added urgency to Beijing's efforts to promote the development of
local information technology companies. Chinese media have called
the U.S. "a high-level hooligan", while officials have accused
Washington of applying "double standards" on issues of cyber spying.
"The U.S. side is not qualified to finger point at others while its
own notorious misbehavior stands uncorrected," Foreign Ministry
spokesman Qin Gang said on Thursday.
Beijing is emphasizing the importance of network security,
particularly for its energy, transport and finance sectors. That
effort intensified following Snowden's revelations, just as U.S.
technology firms began reporting a drop in their China sales.
[to top of second column]
In August, the National Development and Reform Commission, China's
top economic planning body, set out cyber security standards for
financial institutions, cloud computing and big data, information
system secrecy management and industrial controls. And last week,
China said it will investigate providers of important IT products
and services to protect "national security" and "economic and social
development." Central government offices have also this year been
banned from using Windows 8, Microsoft Corp's latest operating
system, in new computers.
"The nation's information security could come under direct threat if
the software we use was implemented with backdoor viruses and the
like," Mian Wei, a minister at the Ministry of Industry and
Information Technology (MIIT), was quoted as saying by the official
China Daily newspaper on Friday. "Our job is to make sure such
things do not happen."
MORE LOCAL SOURCING
At least four domestic software and hardware makers, including
Neusoft and ChinaSoft, have received a "top-tier" rating from the
MIIT, allowing them to provide services to government agencies that
handle top secret information.
"We have used (in the past) IBM, Oracle and other foreign products
and networks," said Lin Shanshan, an investor relations officer at
ChinaSoft, which is a subsidiary of China Electronics Corp [CELEC.UL],
the central government conglomerate that controls 13 listed
companies. "In future, we'll be using more China software for
domestically manufactured networks."
ChinaSoft, whose customers include the State Tobacco Administration,
Environmental Protection Agency and Meteorological Bureau, is
rolling out new cloud products to complement its firmware, security
software and operating systems.
"National policy is a bellwether," said ChinaSoft's Lin. "The
government is vigorously promoting cloud applications, and we'll
certainly need to keep up with this opportunity."
At Neusoft, Lu Zhaoxia says that even as innovation has helped the
company expand at home, government policies haven't hurt either, as
China's use of online and mobile services become increasingly
important and U.S. tech services providers remain suspect.
"For individuals, the state, businesses, data protection has become
an urgent issue," Lu said.
($1 = 6.2399 Chinese Yuan)
(Additional reporting by Beijing newsroom; Writing by Kazunori
Takada; Editing by Ian Geoghegan)
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