The WSJ reports that China is on an extensive push to drive out Western tech companies from the country and replace them with domestic alternatives. China reportedly started its domestic expansion in 2022 with a highly secretive "Document 79," an initiative focused on deleting Western tech companies from the country. Since then, China's new plan has been in full effect — domestic alternatives have replaced most Western software providers.
When initiated two years ago, Document 79 was a super sensitive document that only high-ranking officials were purportedly shown. Security was so paramount that copies of the document were not allowed to be made. The initiative set out by Document 79 is to replace foreign software in China's IT systems by 2027, with state-owned firms required to provide quarterly updates on their progress in replacing foreign software with domestic alternatives.
Two years later, the fruits of Document 79 are now apparent. Microsoft, HP Enterprise, and Cisco's market share in China has fallen drastically in the past several years. In 2018, HP Enterprise had a 14.1% market share in China, but in 2023, that has fallen to just 4%. Cisco's market share has halved in the past five years down to just 8%. Microsoft's Chinese sales today account for just 1.5% of the company's overall sales.
Most government institutions in China are now buying domestic technology over Western solutions, even if the Western solutions are superior due to Document 79. This includes everything from software to hardware solutions. Chinese customers who were buying IBM-powered rack-mount servers five years ago are now requesting Chinese-made rack-mount servers utilizing Huawei chips.
Communications platform WeChat is also following this trend and shifting its hosting and data management from Oracle, IBM, and Microsoft to Chinese companies such as Alibaba and Huawei, which have developed their own database management to replace American tech.
Chinese software is also maturing at an accelerated pace thanks to the extra demand now sought after by large Chinese corporations and the Chinese government. KylnOS, a Chinese home-brewed operating system, is reportedly now comparable to Windows 7 from a decade ago. That might not sound great, but Windows 7 is argued among many people as the best Windows operating system ever.
The WSJ reports that China-based vendors took over half of the $6.3 billion Chinese market for the first time in 2022. This trend has only increased since then, meaning the vast majority of the Chinese tech market is now dominated by domestic solutions. If Document 79 comes to full fruition, all of China's governmental entities will use domestic technology by 2027.
