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IBM servers might be removed from banks: report

2014-05-28 10:44 Global Times Web Editor: Qin Dexing

International Business Machines Corp (IBM), a major US-based server maker, is facing the possible removal of its high-end servers in Chinese banks, Bloomberg reported on Tuesday, citing four unidentified sources.

An undisclosed number of government agencies including the People's Bank of China (PBC) and the Ministry of Finance are involved in a review of whether domestic commercial banks' reliance on IBM servers endangers the nation's financial security, which has the Chinese government pushing for a replacement of high-end servers made by IBM with a local brand, according to the report.

The National Development and Reform Commission, the China Banking Regulatory Commission, and the Ministry of Industry and Information Technology (MIIT) were also purportedly involved in the review.

PBC and MIIT could not be reached for comment on Tuesday. Faxed requests for comments sent to the other three government agencies named in the report were unreturned by press time.

A spokesperson for IBM in China has yet to respond to an e-mailed inquiry sent by the Global Times by press time.

IBM, currently the world's second-largest server maker in terms of revenue behind Hewlett-Packard, according to the latest statistics from research firm Gartner Inc, has already seen its overall business suffer in China, where it saw a 20 percent fall in sales during the first quarter.

As part of efforts to remake its business, IBM announced in January the sale of its low-end server unit to China's Lenovo Group for $2.3 billion. The deal still faces regulatory scrutiny from the US government.

The news of a ban on the use of IBM's high-end servers in domestic banks, if confirmed, would definitely have an impact on IBM's businesses in China, but it's unlikely to affect the $2.3 billion worth transaction which is largely irrelevant to national security concerns, Ma Jihua, an analyst with Beijing Daojing Consultant Co, told the Global Times on Tuesday.

Lenovo was not immediately available for comment.

Ma noted however that the news indicates growing cyber-spying concerns in the wake of the Edward Snowden incident which uncovered the existence of scores of US global surveillance schemes.

A report released Monday by the Internet Media Research Center under China's State Council Information Office said a probe carried out by various Chinese government agencies over the period of several months "confirmed the existence of snooping activities directed against China" by US intelligence agencies.

While the Tuesday report didn't name the local brand that is to replace IBM, it mentioned Ji'nan-based Inspur Group, a major domestic server vendor, which was mentioned in the article as providing servers to China Postal Savings Bank Co as part of a trial program, which started in March 2013 and is planned to be expanded to other banks, according to the report.

Inspur announced Tuesday that it has launched a plan to take over some clients from IBM.

China Postal Savings Bank Co did start using servers made by Inspur beginning from March 2013, a company source familiar with the matter, who declined to be named, told the Global Times on Tuesday.

But the source said she had no knowledge of the trial program.

Many Chinese banks including China Construction Bank have started shifting to the use of high-end servers made by Inspur in recent years, the source revealed, while noting "the use of foreign-made servers hasn't yet been prohibited in domestic banks."

Agricultural Bank of China didn't respond to an e-mailed inquiry sent by the Global Times on Tuesday. Repeated phone calls to Bank of China, China Construction Bank and Industrial and Commercial Bank of China went unanswered.

Inspur unveiled the Tiansuo K1 System in 2013, what it claims to be the country's first self-developed, high-end server.

The Tiansuo K1 System has won over many domestic clients, said the source.

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