China reportedly is ramping up its cyber-security and spying dispute with the United States by asking banks in that country to remove IBM servers and replace them with systems built by Chinese companies.
Citing four unnamed people familiar with the Chinese government’s review on the matter, Bloomberg is reporting that government officials from such agencies as the People’s Bank of China and Ministry of Finance are urging banks to make the switch away from IBM systems in favor of local brands.
The recommendation is the latest move by China in a high-stakes back-and-forth between the country and the United States over the issues of cyber-spying and national security that has been going on for several years, with the latest revelations from former National Security Agency (NSA) analyst Edward Snowden and the United States’ indictment this month of five Chinese military officers for allegedly hacking into the systems of U.S. companies accelerating the dispute.
According to reports, the Chinese government’s review on how dependent the banks are on IBM systems has not been made public, but that the results of the review will be sent to a working group on Internet security led by President Xi Jinping. For their part, IBM officials have said they have yet to hear about any efforts by the Chinese government to ban Big Blue servers.
“IBM is not aware of any Chinese government policy recommending against the use of IBM servers within the country’s banking industry,” IBM spokesman Jeff Cross told Bloomberg. “In fact, news reports now state that China’s National Development and Reform Commission has not heard of any alleged directive to that effect. IBM is a trusted partner in China and has been for more than 30 years.”
The Chinese government’s latest efforts come as IBM continues the process of selling its commodity x86 server business to Lenovo, a Chinese company. The $2.3 billion deal reportedly is getting close scrutiny from the U.S. government.
It also follows China’s banning this month of Windows 8 from government PCs.
U.S. lawmakers for several years have pointed to China as a source of cyber-attacks, and have questioned whether the close relationship major Chinese tech vendors like Huawei and ZTE have with their government poses a security threat to the United States. A congressional report in 2012 expressed such concerns and urged U.S. telecommunications companies to avoid buying networking gear from those two companies for fear that they could include backdoors that would give the Chinese government access to U.S. networks and sensitive data, and could become a launching pad for cyber-attacks.
IBM Systems Reportedly Targeted by Chinese Officials
Both vendors and Chinese officials disputed the report, but such suspicions have made it increasingly difficult for Huawei to sell its networking gear in the United States although the company is continuing to try to expand the reach of its U.S. enterprise solutions business. Earlier this year, Huawei officials noted that the European market is more open to its technology, and that in 2013, the company had increased its investments in the region, spending $3.4 billion buying components and services from Europe.
The leaks from Snowden over NSA spying—both domestically and internationally—have given China more of an upper hand, particularly with recent reports that the NSA was intercepting shipments of IT equipment from such U.S. vendors as Cisco Systems to install surveillance technology. The allegations follow a report by German magazine Der Spiegel in January that the NSA had compromised computing systems from U.S. vendors to aid in its spying activities.
The Chinese government responded earlier this month by saying it will take a look at tech companies with operations in the country, which is one of the largest and fastest-growing tech markets in the world. According to the Financial Times, China also ordered that all state-owned companies stop doing business with U.S. consulting firms.
China’s actions and its dispute with the United States already are taking a toll on U.S. tech companies. Cisco officials May 14 said the giant networking vendor is seeing continued softness in emerging markets—including China—with sales in the first three months of the year falling off 13 percent over the same period in 2013.
Cisco CEO John Chambers wrote President Obama May 18 asking that the administration rein in the NSA’s spying programs, saying it is damaging global confidence in the industry and hampering vendors’ ability to sell their products.
“We simply cannot operate this way,” Chambers wrote. “Our customers trust us to be able to deliver to their doorstops products that meet the highest standards of integrity and security.”
The United States on May 19 indicted five Chinese officers for allegedly hacking into the systems of U.S. companies, allegations that Chinese government officials accused the United States of making up.