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Chinese government to replace foreign hardware and software within three years

In a government directive issued to public institutions earlier this spring, Beijing officials have ordered the government offices and public institutions of China to replace foreign hardware and software with alternatives constructed in China within the next three years. The directive is known as 3-5-2, based on the percentage targets imposed on government organizations by the Chinese communist party. In 2020 the directive will be in effect, and government organizations are required to replace 30% of their foreign hardware and software in their respective systems, followed by a 50% replacement percentage in 2021, and another 20% in 2022, ultimately replacing all of the foreign hardware and software in their systems by 2023.

The directive remained secret since last spring, recently becoming publicized when it was leaked to the Financial Times last week. The Financial Times has allegedly confirmed the directive with employees of a private cybersecurity firm. The directive is expected to impact US companies like HP, Dell, and Microsft, all three of which have previously supplied hardware and software for the Chinese government. Privately-owned Chinese companies may continue to use foreign equipment due to the high cost of replacing inventories.

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