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 Others put the shift down to a protectionist impulse to shield
China's domestic technology industry from competition.
Chief casualty is U.S. network equipment maker Cisco Systems Inc,
which in 2012 counted 60 products on the Central Government
Procurement Center's (CGPC) list, but by late 2014 had none, a
Reuters analysis of official data shows.
Smartphone and PC maker Apple Inc has also been dropped over the
period, along with Intel Corp's security software firm McAfee and
network and server software firm Citrix Systems.
The number of products on the list, which covers regular spending by
central ministries, jumped by more than 2,000 in two years to just
under 5,000, but the increase is almost entirely due to local
makers.
The number of approved foreign tech brands fell by a third, while
less than half of those with security-related products survived the
cull.
An official at the procurement agency said there were many reasons
why local makers might be preferred, including sheer weight of
numbers and the fact that domestic security technology firms offered
more product guarantees than overseas rivals.
China's change of tack coincided with leaks by former U.S. National
Security Agency (NSA) contractor Edward Snowden in mid-2013 that
exposed several global surveillance program, many of them run by the
NSA with the cooperation of telecom companies and European
governments.
"The Snowden incident, it's become a real concern, especially for
top leaders," said Tu Xinquan, Associate Director of the China
Institute of WTO Studies at the University of International Business
and Economics in Beijing. "In some sense the American government has
some responsibility for that; (China's) concerns have some
legitimacy."
Cybersecurity has been a significant irritant in U.S.-China ties,
with both sides accusing the other of abuses.
U.S. tech groups wrote last month to the Chinese administration
complaining about some of its new cybersecurity regulations, some of
which force technology vendors to Chinese banks to hand over secret
source code and adopt Chinese encryption algorithms.
The CGPC list, which details products by brand and type, is approved
by China's Ministry of Finance, the CGPC official said. The list
does not detail what quantity of a product has been purchased, and
does not bind local government or state-owned enterprises, nor the
military, which runs its own system of procurement approval.
The Ministry of Finance declined immediate comment.
"We have previously acknowledged that geopolitical concerns have
impacted our business in certain emerging markets," said a Cisco
spokesman.
An Intel spokesman said the company had frequent conversations at
various levels of the U.S. and Chinese governments, but did not
provide further details.
Apple declined to comment, and Citrix was not immediately available
to comment.
SECURITY PRETEXT?
Industry insiders also see in the changing profile of the CGPC list
a wider strategic goal to help Chinese tech firms get a bigger slice
of China's information and communications technology market, which
is tipped to grow 11.4 percent to $465.6 billion in 2015, according
to tech research firm IDC.
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"There's no doubt that the SOE segment of the market has been
favoring the local indigenous content," said an executive at a
Western technology firm who declined to be identified.
The executive said the post-Snowden security concerns were a
pretext. The real objective was to nurture China's domestic tech
industry and subsequently support its expansion overseas.
China also wants to move to a more consumption-based economy, which
would be helped by Chinese authorities and companies buying local
technology, the executive said.
Policy measures supporting the broader strategy include making
foreign companies form domestic partnerships, participate in
technology transfers and hand over intellectual property in the name
of information security.
Wang Zhihai, president and CEO of Beijing Wondersoft, which provides
information security products to government, state banks and private
companies, said the market in China was fair, especially compared
with the United States, where China's Huawei Technologies [HWT.UL],
the world's largest networking and telecoms equipment maker, was
unable to do business due to U.S. security concerns.
Local companies were also bound by the same cybersecurity laws that
U.S. companies were objecting to, he added.
The danger for China, say experts, is that it could leave itself
dependent on domestic technology, which remains inferior to foreign
market leaders and more vulnerable to cyber attack.
Some of those benefiting from policies encouraging domestic
procurement accept that Chinese companies trail foreign competitors
in the security sphere.
"In China, information security compared to international levels is
still very far behind; the entire understanding of it is behind,"
said Wondersoft's Wang.
But Wang, like China, is taking the long view.
"In 10 or more years, that's when we should be there."
(Additional reporting by Beijing Newsroom and Noel Randewich in SAN
FRANCISCO; Editing by Will Waterman)
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