China, US Quarrels Could Get Ugly for Telecom
The simmering trade war between the US and China could be heating up, as China dropped top US vendors from its approved state purchase list, according to reports this week.
Cisco Systems Inc. (Nasdaq: CSCO), Apple Inc. (Nasdaq: AAPL), Citrix Systems Inc. (Nasdaq: CTXS), Intel Corp. (Nasdaq: INTC) and McAfee Inc. (NYSE: MFE) were among the firms conspicuous by their absence from the Central Government Procurement Center's list of approved vendors, according to a Reuters investigation.
The cause: either security concerns about Western cyber surveillance, or protectionism for China's own products, according to different Reuters sources.
Cisco is the "chief casualty," with 60 products on the list in 2012 and none late last year, according to Reuters.
Cisco said in November that revelations about US spying hurt revenue in emerging markets, including China. But Cisco cited other financial difficulties as well, including a carrier spending slowdown. Overall, Cisco reported improving finances in November and healthy returns this month. (See Cisco Busts Slump Despite Carrier Slowdown and Cisco Sees Strong Quarter Despite Carrier Weakness.)
While the number of products on the list for regular spending by central ministries grew to just under 5,000 (more than 2,000 more than two years ago), the increase comes almost entirely from local companies, Reuters says. The number of foreign tech brands fell by a third, and less than half of vendors with security-related products survived.
A Chinese government official told Reuters that local Chinese companies might be preferred by sheer numbers, or because of more product guarantees from domestic security firms compared with overseas rivals.
Trade conflict between the US and China goes back several years, and security is often the reason (or pretext). In 2012, a committee of US congress said Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) pose a security risk and US companies shouldn't do business with them. (See US vs Huawei/ZTE: The Verdict.)
This month, European companies talked with China and its businesses to expand cooperation. (See Eurobites: Operation 'Woo China' Kicks In.)