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.
The con was that the western companies gave over some serious IP for a decade or maybe 2 of cheap manufacturing. China was trying to industrialize for decades and essentially couldn’t do it. Walk in the western companies and they gave all the knowledge, skill, everything ($$$$) for some cheap labour ($).
Western companies think 5 years is a long term plan, so they’ll take whatever terms for 5 years (mayyybe 10 if they are unheard of long term planning) and after that is ???, but profit-now-is-everything-by-definition. But China is playing decades at a time, they are getting decades, close to a century of IP, for next to nothing in the big picture.
Yes, china got some leapfrog effect, but tech isn’t static. And they are going to hit a wall with AI in particular because of the rampant censorship they cling to for no good reason.
We have seen this play out before. The closed down, autocratic paradigms lose out to the open, permissive ones. If America ends up in decline it will be because Christian nationalists fucked it all up, but it’s not going to make China more powerful. The only way for China to become powerful is to liberalize.
That’s not what leapfroging is. Leapfrogging is skipping over technology EG skipping over land lines and going to cell phones. That does happen but that wasn’t what I was getting at. What I’m getting at is they took in serious serious IP and industrial knowledge. They took in, this is a bit of hyperbole just to get the point across, a century of IP in exchange for some cheap labor for a couple decades. That’s how short-sighted Western companies are. (A few decades overall, but for any specific company contract they would get the IP in 5 to 10 years.)
Nor did I suggest that they’re closing down. You’re simply off the mark on that. I don’t think the other guy suggested that either, but I didn’t address it. They want to sell to Africa, South America, etc.