Local server stocks rise on rumors of IBM bank ban

An investor at a security firm in Fuyang, Anhui province. Stocks of Chinese information technology companies jumped Wednesday on speculation that China may remove IBM Corp's servers from its banking sector. Lu Qijian / For China Daily

Domestic IT providers likely to see their adoption rate rise, analyst says

Stocks of Chinese information technology companies jumped Wednesday on speculation that China may remove IBM Corp's servers from its banking sector. Industry insiders believe local IT providers are set to be the biggest beneficiaries as the nation's cybersecurity concerns increase.

Yonyou Software Co Ltd, the largest local enterprise software maker by market share, surged by 7.82 percent on the Shanghai Stock Exchange on Wednesday. The CSI 300 Information Technology Index also rose by 2.85 percent, hitting its highest close since May 6. The index monitors top tech companies trading on the Shanghai and Shenzhen stock exchanges.

Also jumping was Lenovo Group Ltd, the world's No 1 personal computer maker and a major server provider in China. The Hong Kong-listed company was up by 1.03 percent.

Local IT providers are most likely to see their adoption rate rise as the Chinese government tightens restrictions on products provided by overseas companies, said Gene Cao, senior analyst at Forrester Research Inc.

Industry regulators, including the People's Bank of China, the central bank, and the Ministry of Finance, are reviewing a new rule to have the nation's commercial banks stop using IBM servers because of potential security risks, Bloomberg reported, citing anonymous sources.

IBM Corp is "not aware of" any Chinese government policy to remove its servers from the banking industry, the United States company said in a statement.

China Daily contacted Chen Wenxiong, director of the technology risk management office at the China Banking Regulatory Commission to corroborate the story, but he said that he had "no idea" about any new policy and refused to comment.

"In fact, news reports now state that China's National Development and Reform Commission has not heard of any alleged directive to that effect," said IBM, adding that it has been a "trusted partner" in China for more than 30 years.

IBM's high-end servers are widely used in Chinese banks. Big Blue refused to provide its exact market share.

Although there are no sign of local banks dropping servers provided by IBM, local manufacturers are already taking the initiative to try to lure customers away from IBM.

Inspur Group Ltd, a Jinan-based server provider, has started an "IBM to Inspur" campaign to weaken Big Blue's market share, according to Bloomberg.

"It is common for every country to choose homegrown technology suppliers over foreign companies if their technology level is even," said Kitty Fok, China managing director for global research firm IDC.

In January, IBM sold its lower-end server unit to Lenovo Group Ltd for $2.3 billion. The deal is currently under review in many countries, including the United States and Canada. The acquisition will be completed later this year, Lenovo said.

In March, a massive strike hit IBM's x86 server factory in southern Guangdong province due to labor disputes.

IBM provides high-end servers such as the System z and Power Architecture-based product lines.

The company's other China business, including some with heavy government involvement, seem to be operating as usual despite uncertainties in the server unit.

IBM is scheduled to ink a deal with local governments on providing air pollution monitoring solutions in several cities, including Beijing, the seat for all major government organizations.

Other US technology companies are also feeling pressure in China as tensions over Sino-US cybersecurity issues escalate.

Microsoft Corp and Cisco Systems Inc expressed concern to China Daily about separate decisions made by the Chinese government over the past week to tighten restrictions.

Most of these moves came after the US accused five Chinese military officials of stealing business information from US companies. China denied the accusations, saying they were "made up".