IT vendors in search of new business code

In late May, the State Internet Information Office announced that China will review information technology products used in key industries and government agencies to "maintain national security and protect the public interest".

What that means in practice is that all IT hardware, software and even consulting services provided by foreign companies will undergo close government scrutiny before being put into use.

The policy seems to be a source of concern for US firms operating in China. "More approval processes will make the Chinese government and State-owned enterprises more cautious when selecting IT vendors," said Gene Cao, a senior analyst at Forrester Research Inc.

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Over the past two years, the Chinese government and SOEs have become less ready to buy imported IT products, he said.

But analysts said although China is determined to use domestic IT products in strategically important industries, it may take years - if not decades - for the country to be able to abandon IBM, Oracle Corp and EMC Corp.

Wang Pei, research manager at research firm International Data Corp, known as IDC, told China Daily that the technology gap between Chinese and overseas vendors is still large, especially in the high-end enterprise use market.

"Chinese providers have the smallest gap in the enterprise-level data-loss prevention market, in which they are about three years behind. So you can imagine the situation in other high-tech segments," said Wang.

Earlier this month, news portal Sohu posted an internal document believed to be from the Ministry of Public Security, which told its branches to delete Symantec's security software and replace it with domestic applications. That step was likely aimed at US companies.

Top European companies, such as SAPAG, a Germany-based enterprise software provider, and Dassault Systemes SA, a French industrial designing software company, are not affected although their products are also widely used in key sectors.

Tech companies from China and the US have been caught in the crossfire of the escalating Sino-US cybersecurity conflict, said Charlie Dai, principal consulting analyst from Forrester." Security has been a bargaining chip used by both sides to protect their domestic markets against foreign competitors for a longtime," he said.

Dai cited telecom equipment maker Huawei Technologies Co Ltd, personal computer maker Lenovo Group Ltd and software outsourcing provider Pactera Technology International Ltd as three targets from China.