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China Said to Exclude Apple From Procurement List

August 08, 2014

China Said to Exclude Apple IPads, Laptops From Procurement List

China’s government excluded Apple iPads and MacBook laptops from the list of products thatcan be bought with public money because of security concerns, according to government officials familiar with the matter. Photographer: Andrew Harrer/Bloomberg

(Corrects to show that government departments can continue to purchase some Apple computers in third paragraph of story originally published Aug. 6.)

China’s government excluded Apple Inc. (AAPL:US) iPads and MacBook laptops from a list of products that can be bought with public money because of security concerns, according to government officials familiar with the matter.

Ten Apple products -- including the iPad, iPad Mini, MacBook Air and MacBook Pro -- were omitted from a final government procurement list distributed in July, according to officials who read it and asked not to be identified because the information isn’t public. The models were on a June version of the list drafted by the National Development and Reform Commission and Ministry of Finance, the officials said.

A separate procurement list includes some Apple computers that departments can continue to buy on a smaller scale, defined as purchases totaling less than 1.2 million yuan ($195,000), according to a state purchasing website.

Apple is the latest U.S. technology company to be excluded from Chinese government purchases amid escalating tensions between the countries over claims of hacking and cyberspying. China’s procurement agency told departments to stop buying antivirus software from Symantec Corp. (SYMC:US) and Kaspersky Lab, while Microsoft Corp. (MSFT:US) was shut out of a government purchase of energy-efficient computers.

“When the government stops the procurement of products, it sends a signal to corporates and semi-government bodies,” said Mark Po, an analyst with UOB Kay Hian Ltd. in Hong Kong. “The Chinese government wants to make sure that overseas companies shouldn’t have too much influence in China.”

China Sales

Apple depended on Greater China for about 16 percent of its $37.4 billion in revenue last quarter, according to data compiled by Bloomberg. IPad sales in the world’s biggest market increased by 51 percent and Mac sales by 39 percent, Chief Executive Officer Tim Cook said July 23.

The heightened scrutiny of foreign companies follows Edward Snowden’s revelations last year of a National Security Agency spying program and the May announcement of indictments by U.S. prosecutors of five Chinese military officers for allegedly stealing corporate secrets.

Kristin Huguet, a spokeswoman for Apple, declined to comment. The Ministry of Finance and NDRC didn’t immediately respond to faxes seeking comments about the procurement list, which doesn’t include smartphones.

The register applies to all central Communist Party departments, government ministries and all local governments, according to the officials. The next review for the list will be in January, the people said. Products from Dell Inc., Hewlett-Packard Co. and Chinese maker Lenovo Group Ltd. were included on both lists, the officials said.

Microsoft, Google

Lenovo shares rose as much as 1.7 percent in Hong Kong trading, while the benchmark Hang Seng Index declined.

China said in May it would vet technology companies operating in the country for potential national-security breaches after the government threatened retaliation for the U.S. indictment of the Chinese officers.

The exclusions may add pressure to U.S.-China relations, which are strained by Chinese territorial disputes with U.S. allies such as Japan and the Philippines as well as economic competition around the world.

Microsoft said in May it was “surprised” to learn that its Windows 8 operating system was excluded from government purchases. The official Xinhua News Agency called it “a move to ensure computer security.”

China regulators opened an anti-monopoly investigation into Microsoft in July, seizing computers and documents from offices in four cities.

Microsoft, Google Inc., Facebook Inc. and Apple have been criticized by state media for allegedly cooperating with a U.S. spying program, and Qualcomm Inc. in November disclosed an investigation related to anti-monopoly law.

Last month, state-run China Central Television reported that features of Apple’s iPhone software may result in the leak of state secrets. Apple rejected those claims.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net; Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner


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