China rushes to swap Western tech with domestic options as U.S. cracks down

investing.com:

BEIJING (Reuters) — China has stepped up spending to replace Western-made technology with domestic alternatives as Washington tightens curbs on high-tech exports to its rival, according to government tenders, research documents and four people familiar with the matter.

Reuters is reporting for the first time details of tenders from the government, military and state-linked entities, which show an acceleration in domestic substitution since last year.

China has spent heavily on replacing computer equipment, and the telecom and financial sectors are probably the next target, said two people familiar with the industries. State-backed researchers also identified digital payments as particularly vulnerable to possible Western hacking, according to a review of their work, making a push to indigenize such technology likely.

The number of tenders from state-owned enterprises (SOEs), government and military bodies to nationalize equipment doubled to 235 from 119 in the 12 months after September 2022, according to a finance ministry database seen by Reuters.

In the same period, the value of awarded projects listed on the database totaled 156.9 million yuan, or more than triple the previous year.

While the database represents only a fraction of tender bids nationwide, it is the largest collection of state tenders publicly available and mirrors third-party data. China spent 1.4 trillion yuan ($191 billion) replacing foreign hardware and software in 2022, marking a year-on-year increase of 16.2%, according to IT research firm First New Voice.

But Beijing's lack of advanced chip-manufacturing capabilities prevents it from completely substituting products with alternatives that are entirely locally made, analysts say. 

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