Jakarta Globe, Steven Yang & Edmund Lococo, May 27, 2014
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| A combination photo of five military officers of China's People's Liberation Army. A combination photo shows five Chinese military officers who the US has accused of cyber espionage. (Reuters Photo/FBI Handout) |
The Chinese
government is pushing domestic banks to remove high-end servers made by
International Business Machines and replace them with a local brand, according
to people familiar with the matter, in an escalation of the dispute with the US
over spying claims.
Government
agencies, including the People’s Bank of China and the Ministry of Finance, are
reviewing whether Chinese commercial banks’ reliance on IBM servers compromises
the country’s financial security, said the four people, who asked not to be
identified because the review hasn’t been made public.
The review
fits a broader pattern of retaliation after American prosecutors indicted five
Chinese military officers for allegedly hacking into the computers of US
companies and stealing secrets. Last week, China’s government said it will vet
technology companies operating in the country, while the Financial Times
reported May 25 that China ordered state-owned companies to cut ties with US consulting
firms.
Harriet Ip,
a Singapore-based spokeswoman for IBM, referred questions to IBM in the US
Jeffrey Cross, a Somers, New York-based spokesman, didn’t immediately respond
to an e-mail seeking comment outside US business hours.
“Security
trumps everything,” said Duncan Clark, chairman of BDA China Ltd., a
Beijing-based consultant to technology companies. “China doesn’t need the US
companies in the way it did for the last few decades.”
The results
of the government review will be submitted to a working group on Internet
security led by President Xi Jinping, two of the people said.
Spokesmen
for Bank of China, China Construction Bank and Industrial & Commercial Bank
of China declined to comment. Three phone calls to Agricultural Bank of China’s
Beijing press office weren’t returned.
US
technology sales in China have come under increasing threat following Edward
Snowden’s revelations last June of a National Security Agency spying program.
Forrester Research Inc. estimates purchases of information-technology products
in China will rise 11 percent this year to $125 billion, meaning other US
technology companies including Microsoft face threats to their business.
Microsoft
said this month it was “surprised” to learn that China Central Government
Procurement Center has excluded its Windows 8 operating system from a
government purchase of energy-efficient computers. The nation’s official Xinhua
News Agency called it “a move to ensure computer security.” China is the
world’s largest market for personal computers.
“China’s
government is in a strong position given Snowden’s disclosures,” Clark said.
“If you give them an excuse, they will aggressively promote domestic brands.”
The
directive would be a further blow to IBM’s business in China, where sales fell
20 percent in the first quarter. In an April conference call, Chief Financial
Officer Martin Schroeter said the challenges were cyclical, “and we still see
good opportunity over the long term” in China.
IBM
announced in January it would sell its low-end server computer business to
Beijing-based Lenovo for $2.3 billion. That transaction faces regulatory
scrutiny including a US national security review. Angela Lee, a Hong Kong-based
spokeswoman for Lenovo, said she couldn’t immediately comment about the report.
In addition
to concern about Armonk, New York-based IBM’s equipment as a security threat,
China’s government also believes IBM servers are more expensive in China than
in other regions, the people said.
China
Postal Savings Bank is using servers made by Jinan-based Inspur as part of a
trial program that began in March 2013, the people said. The government plans
to expand that trial to other banks, they said.
The group’s
Inspur International unit gained 10 percent to HK$1.53 at 2:57 p.m. in Hong
Kong trading today. In Shenzhen, Inspur Electronic Information Industry Co.
rose 4.7 percent.
Other
agencies involved in the review include the National Development and Reform
Commission, the China Banking Regulatory Commission, and the Ministry of
Industry and Information Technology, the people said. The NDRC, the Finance
Ministry, the central bank and the CBRC didn’t immediately respond to faxed
requests for comment.
The US
indictment, announced May 19, led China to suspend its involvement in a
cybersecurity working group and drew formal protests from the ministries of
defense and foreign affairs. The State Internet Information Office likened the
US actions to “a thief yelling ‘Catch the thief.’”
Bloomberg
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