CNPC signs IT contracts with Huawei

The worry of overseas technology companies that the State-owned enterprises may favor local vendors is gradually becoming a reality after a number of US IT firms were subject to monopoly investigations or security criticisms in China.

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China National Petroleum Corp, the largest SOE in the oil industry, said on Friday it has signed an agreement with Huawei Technologies Co Ltd to purchase information technology products and services. The value of the deal is unknown.

It was the first major IT deal signed by a top SOE after US vendors, including IBM Corp, Microsoft Corp and Qualcomm Inc, were accused of threatening national security.

"The CNPC-Huawei strategic procurement deal will guarantee both parties' core interests," CNPC said in a statement.

Yu Baocai, deputy general manager of CNPC, called Huawei a "trusted partner" and pledged to give the Guangdong-based telecom equipment maker steady IT orders.

Xu Wenwei, Huawei's head of the enterprise business division, also underlined the Chinese company's "advantages in providing information security solutions".

Huawei is one of the largest IT providers in the country. Its servers are in direct competition with those of IBM, EMC Corp and Lenovo Group Ltd.

The SOEs are likely to sign more deals with local IT providers to avoid unexpected regulatory troubles caused by adopting foreign-made products.

Charlie Dai, principal consulting analyst at Forrester Research Inc, said regulator's tight measures are set to drag down the China business of IT multinationals, especially at the lower end of the market where local vendors offer an alternative.

"Chief information officers in normal enduser companies will need to update or even redesign the company's security architecture because of the increasing safety concerns," Dai said.

Extra caution over data security has created more barriers for overseas IT providers, he said.

IT products acquired by SOEs are part of a government procurement project in China. Providers are asked to pass an examination before selling products to governments and SOEs.

In May, the State Internet Information Office imposed a cybersecurity review on hardware, software and service providers.