Breaking US dominance

The "cyber war" between China and the US escalated in the beginning of May when the US Justice Department announced it was pressing charges of economic espionage against five members of a unit allegedly in charge of electronic warfare within China's People's Liberation Army (PLA). The officers had reportedly been involved in the hacking of US companies.

China rejected these accusations as "fabricated and absurd" and quickly cancelled bilateral talks on cyber security that had only been agreed upon recently. But it seems that Beijing does not intend to react merely on the diplomatic front: In mid-May, it forbade government agencies from updating their computers to the new Microsoft Windows 8 operating system. Chinese officials justified the move, saying the new system had "built-in backdoors."

China has been threatening to stop using US products such as IBM servers or Cisco routers for some time. Simultaneously, the US has been warning companies from using Chinese technology. According to information leaked by former US intelligence contractor Edward Snowden, Chinese smart phone maker Huawei has been the target of intensive espionage by the National Security Agency (NSA) - all the more reasons for the growing mutual mistrust.

Tedious catch-up race

China has been trying to become independent from US technology since long before the first Snowden revelations. The year 1999 saw the release of the first version of Red Flag Linux, an open operating system specifically designed to replace Microsoft's Windows on computers used in China.

But implementation has been slow. According to the US technology website Ars Technica, 90 percent of the Chinese are still using Windows. In fact, any competitor seeking to enter the Chinese market faces huge challenges - as demonstrated by Red Flag which officially declared bankruptcy in February 2014.

This is why the Chinese Ministry for Industry and Information Technology (MIIT) and the British company Canonical recently started working on an alternative operating system called "Ubuntu Kylin."

Another area where China would prefer to break free from US software dependencyis mobile phones. However, it might be difficult to convince consumers of this approach as operating systems used on Chinese-made smart phones - such as Xiaomi - are almost exclusively based on Google's Android and user numbers are growing increasingly fast, especially in rural areas and smaller cities. Reversing that trend might prove quite a challenge.

Furthermore, experts are of the view that even the successful development of a better operating system does not guarantee a large market share. "There is this concept called network effect: Once a sufficient number of people start using a product, others will follow, even if it isn't, objectively seen, the best solution," economist and sinologist Doris Fischer told DW. Right now, Microsoft and Google seem to be the ones profiting from this trend in China.

Closing 'security gaps'

On another front, China announced stricter requirements for IT products "relevant to national security" in the beginning of May, with Western media fearing the measure was primarily directed against foreign companies. However, Li Jingchun from the Beijing-based National Research Centre for IT Security told DW that foreign and domestic companies would not be treated any differently. "We could even take over the Common Criteria Standard that is applied in other countries," he said.

According to Li, Beijing's tougher regulations are mainly designed to find "security gaps in products relevant to national security," so that companies can cooperate with the Chinese government in fixing them.

At the same time, criticism of US technology companies by Chinese state media has intensified over the past weeks, with outlets calling on Beijing "to punish severely the pawns" of the U.S. government for monitoring China and stealing secrets. While IBM's servers continue to set the industry standard for both enterprises and banks, Cisco has been struggling in the Chinese market for some time now.

Not only does the networking equipment manufacturer have to compete with strong Chinese competitors such as Huawei and ZTE, it has also suffered under the fallout from Snowden revelations according to which the NSA had built chips into export-ready Cisco products, albeit without the company's knowledge.

Companies vs. government

Just like in the software field, developments in the hardware market will depend on Chinese companies developing competitive alternatives to US technology: "The only places where the government can directly change the products currently being used are government institutions themselves. Once they try to force Chinese companies into following suit, they will resist," Doris Fischer explains.

In the meantime, some Chinese companies seem keen to recruit employees from US tech firms. According to a report by the New York Times, the Chinese server manufacturer Inspur announced a campaign titled "IBM to Inspur" in which it prided itself in having taken over several employees from IBM.

Simultaneously, Lenovo, world market leader for desktop PCs, is negotiating with IBM to purchase its unprofitable low-end server business. According to Hong Kong's South China Morning post, the deal is now under threat due to the growing tensions between the two countries. Moreover, US regulators could still prevent the purchase from happening.