China to replace all foreign hardware and software at government and public institutions by 2022

Beijing's "3-5-2" policy plans to phase out foreign tech suppliers in favor of local alternatives over the next three years

In context: In its ongoing trade war with the US, China's Communist Party has issued a directive seeking the mass replacement of all foreign computer equipment in government offices and public institutions within three years, in an attempt to increase its reliance on domestic technology amid the current US sanctions. Orders from the ruling party were reportedly disseminated earlier this year and recently brought to light in a report by the Financial Times.

Among several developments in the US-China trade war has been the latter's push to make itself technologically independent of the US semiconductor industry. A major step in this direction is an order passed by the Chinese Communist Party, to push the government and public institutions to replace foreign-made computer equipment with local products.

Given its impact on US companies that have ongoing businesses with the Chinese government, such as Dell, HP, and Microsoft, the directive was meant to be implemented in secrecy, until details around its existence leaked to the Financial Times.

Although the policy documents remain confidential, employees from two cybersecurity firms, on the basis of anonymity, confirmed the new directive the FT after becoming aware of it through government clients.

According to the publication, the directive came directly from the Chinese Communist Party's Central Office earlier this year and will result in an estimated 20 to 30 million pieces of hardware that will need to be replaced over the course of three years.

China internally refers to the policy as "3-5-2" which is indicative of the pace at which replacements will be carried out. By the end of next year, 30 percent of foreign-made equipment in official use will be substituted with locally manufactured products from companies like Huawei and ZTE, among others. The plan will target another 50 percent of the equipment in 2021, and the remaining 20 percent will be replaced in 2022.

For now, this directive does not apply to privately-owned Chinese companies. It will also be challenging for government agencies to implement this change, considering that a majority of them use Lenovo PCs, which are powered by US-made hardware (Intel) and software (MS Windows).