China accelerates drive to replace Western tech with homegrown solutions

In response to stricter US regulations on high-tech exports, China is intensifying its efforts to substitute Western technology with domestic options. This shift, evident in government tenders, research documents, and insider information, has gained momentum since late 2022. Notably, there has been a notable increase in the number of tenders issued by state-owned enterprises (SOEs), government entities, and the military for technology localisation. The value of these awarded projects has significantly increased in the year following September 2022, totalling approximately $191 billion in spending on the replacement of foreign hardware and software.

The government has imposed specific deadlines for SOEs to adopt domestic office software systems by 2027, with a particular focus on sensitive areas such as digital payments. China’s worries about the susceptibility of Western equipment to foreign hacking have fueled these initiatives, prompting state-linked researchers to advocate for enhanced anti-hacking measures in the financial sector.

Why does this matter?

The motivations behind this shift are rooted in concerns about geopolitical factors and the potential for cyberattacks. The primary focus has been on replacing computer equipment, with indications that the telecom and financial sectors will also transition. Despite these endeavours, foreign companies still dominate the banking-related software sector, as domestic alternatives grapple with the challenges of meeting the sector’s rigorous stability and security requirements. Nevertheless, Huawei has emerged as a key player in this substitution process due to its comprehensive range of products, which encompasses chips, software, and secure data processing capabilities.