IBM confident on growth in China business

Company unfazed on market outlook as pressures for localization intensify

IBM Corp's partnership with Chinese banks remains active despite reports stating Big Blue's servers were ousted from the industry over security concerns, company executives said.

Analysts said Chinese server companies will need at least three more years to replace products made by overseas players in key segments because of the technology lag.

Dah-Chuen Chien, chairman and CEO of IBM's China group, said the company is "constantly working" with a number of local banks to supply IBM solutions, services.

"We value our relationship with the Chinese government, and are willing to do more to help Chinese technology development," he said, adding clients chose IBM as the company is a "trusted solutions provider".

Multiple Chinese media outlets reported in late May that China had banned local banks from purchasing servers made by IBM over fears that the company could leak sensitive information to the US government. IBM said at the time it was not aware of any government policy to remove its servers from the banking industry.

Chinese regulators kicked off a series of measures against overseas technology companies which, according to industry sources, are efforts to shore up business for local companies.

Other multinationals, like Microsoft Corp, Qualcomm Inc, General Motors Corp and Symantec Corp, found themselves in government-led product bans and monopoly probes over the past few months. The Chinese government has, for its part, not yet announced any regulation that bans the use of foreign products in the banking industry.

Gene Cao, a senior analyst at consulting firm Forrester Research Inc, said most of the clients in the banking sector are preparing for the transition from overseas servers to local products, as they feel they would be asked to migrate to local platforms at a later date.

"I don't think the government plans to put out any bans on overseas server products in the next two to three years because high-end servers are still dominated by global brands," he said.

IBM is selling its x86 server business to Chinese personal computer maker Lenovo Group Ltd for $2.3 billion.

Yang Yuanqing, chairman and CEO of Lenovo, expects the buyout could be concluded by the end of this year. The deal passed government review in the United States a week ago.

IBM will keep its presence in the Chinese high-end market after the sale. The company is also pushing a technology-sharing project in the country in a bid to form a stronger bond with local tech firms. Earlier this year, six Chinese chipmakers joined an OpenPOWER consortium led by IBM, designing made-in-China microprocessors.

"We as a company is contributing to the industry and the Chinese economy," said Chien.

The People's Bank of China, the central bank, is looking for home-made information technology products to better manage financial data across the industry.

Lin Xiaoxuan, chief information officer of Industrial and Commercial Bank of China Ltd, wrote in an article on industry magazine Financial Computer of China that dumping overseas IT products for home-made counterparts may cause serious security risks.