The Chinese Communist Party (CCP) is accelerating its process of eliminating American technology, known as the “Xinchuang Plan,” which calls for the localization of both software and hardware in infrastructure. Key targets include Party and government agencies, the financial industry, with telecommunications, electricity, transportation, petroleum, and aerospace industries following suit, gradually expanding into other sectors.
Experts indicate that the CCP is implementing the Xinchuang Plan to secure its political power, but this move blocks China’s further development. The ones most affected are the Chinese people, as they lose the opportunity to align with international standards, learn from advanced civilizations, and improve their quality of life.
According to recent reports by The Wall Street Journal, a key focus of the CCP’s efforts to replace foreign technologies is removing American chip manufacturers from China’s telecommunications systems. Officials directed major telecom operators to gradually eliminate foreign processors serving as the core of their networks by 2027, impacting American chip giants like Intel and AMD.
In March, the Financial Times reported that the CCP introduced new guidelines aiming to gradually phase out American processors from government personal computers and servers. The stricter government procurement policy also aims to substitute Microsoft’s Windows operating system and foreign-made database software with domestic alternatives.
The CCP’s directive issued in 2022, known as Document 79 or “Xiao A,” focuses on clearing out American technology. Officials in Beijing have replaced foreign brand personal computers with domestic ones, and last year, officials were instructed to use domestic brands for work phones instead of Apple’s iPhones.
Six years ago, government tenders mostly sought Western brands for hardware, chips, and software, but by 2023, many government tenders were looking for Chinese tech products.
Locally developed alternatives are becoming more user-friendly. A local official recalled spending an entire day opening and closing spreadsheets on a computer using the KylinOS operating system in 2016. Today, the latest version of KylinOS is comparable in usability to Microsoft’s Windows 7 released in 2009.
Su Ziyun, Director of the Strategic and Resource Department at the Taiwan Institute For Defense and Security Analysis, mentioned to Dajiyuan that the CCP has been engaging in this process for at least 15 years. It initially started with software in CCP government departments; Windows systems were partially replaced by Linux, and the Office system was replaced by the open-source system Open Office, which had been piloted earlier.
The current anti-American initiative aims to remove American information equipment from China. It aims at enhancing the CCP’s control of hardware and software to significantly reduce security risks and ensure Party dominance in various industries, potentially turning CCP into the biggest hacker monitoring organizations or individuals utilizing CCP hardware and software.
“The CCP has always been distrustful of other countries; it believes that only self-sufficiency can satisfy its own sense of security. By controlling these aspects, it turns them into tools for national policy, potentially aggressive in new markets or exploiting IT technologies for intelligence gathering,” said Su.
Regarding the future market layout, the speed at which foreign companies are leaving China may increase, aligning with previous forecasts suggesting that the world will split into two groups: a red digital authoritarian bloc and a digital democratic group.
Li Guanhua, Head of the Policy and Regional Research Group at the Taiwan Institute for Technology Innovation, stated to Dajiyuan that the anti-American technology elimination plan is a growing trend, particularly when both sides view each other as competitors. American companies have realized that relying on production in China is risky, and there have been adjustments in the balance of the manufacturing ratio in China for American companies.
However, he believes that the current CCP ban primarily targets government agencies or critical infrastructure and expects a decrease in market share for American businesses in China in the future. He pointed out that although companies like Intel and AMD, especially Intel, generate nearly 30% of their revenue from the Chinese market, a complete withdrawal is not imminent.
“For enterprises, it may be a situation of fighting and walking away. While withdrawing essential production or critical technology from China, they still consider China as a market and adjust as necessary,” Li explained.
Feng Chongyi, Associate Professor at the University of Technology in Sydney, believes that the current Sino-American cold war escalation mainly focuses on trade, and the CCP’s response will have more significant consequences for China. After forty years of reform and opening up, shifting towards import substitution will deal a severe blow to China’s technological advancement and industrial upgrading.
The “Xiao A” plan reported by The Wall Street Journal is not unfamiliar to mainland China, though its name is more obscure, known as “Xinchuang” or “Information Technology Application Innovation.” This initiative aims at independent research and development of core technologies such as hardware, cloud infrastructure, basic software, application software, and network security to ensure information technology security and control without foreign dependencies.
According to a report by Bloomberg in 2021, as of July 2020, the Xinchuang Committee had 1,160 members, including prominent companies like domestic CPU manufacturer Loongson and information security company Westone. However, any company with over 25% foreign ownership is excluded from the committee.
The “China Information Technology Industry Policy Survey (2022)” revealed that by October 2022, the CCP had issued a total of 166 Xinchuang policies at the national and local levels, with 67 being issued in 2022.
In the Xinchuang industry, Party and government institutions along with the financial sector are in the first tier, while telecommunications, electricity, transportation, petroleum, and aerospace industries are in the second tier. Education and healthcare have a lower penetration rate and are positioned in the third tier.
Xinchuang began with the Party and government agencies, focusing on the development of document systems. The first step was to achieve autonomous control over electronic documents, starting in 2020 after pilot programs in 2013 and 2019. The current promotion is concentrated on city-level Party and government departments, gradually expanding to county-level governments.
By 2022, 31 provincial capital cities and 115 central and state agencies had replaced 5-6 million PCs and servers, with another 15 million units still in line for replacement. Following the lead of Party and government agencies, the finance, telecommunications, electricity, and transportation industries are also accelerating their pursuit of autonomous control starting in 2023 for the next five years.
Li Guanhua stated that for the CCP, having foreign products control or significantly contribute to information channels is unacceptable, posing a high risk to data security.
“In the current competitive environment between the US and China, if the US restricts the export of advanced AI chips to China, the CCP seizes the opportunity to develop import substitutes to secure data sovereignty and enhance its own information technology.” Li explained.
“With the CCP introducing data security and personal information protection laws, everything related to data must be made in China,” Li added.
Regarding the consequences of these actions, Li stated they would inhibit both innovation and technological progress. Moreover, foreign companies looking to expand into the Chinese market will face increasing difficulty concerning data and personal information sectors, as indicated by current legislative trends.
“Under these legal trends, enterprises can only withdraw from sensitive areas. However, until a comprehensive ban on these companies developing in the consumer market is imposed, China should still be seen as a market. It is unlikely for the government to extend its reach into all markets, as it may raise issues of discrimination under the WTO, which the CCP is unlikely to overtly engage in,” Li concluded.
Su Ziyun mentioned that the Xinchuang system follows a three-step process: the first phase involved mobile phones, followed by replacing office computer systems, and the third phase includes infrastructure like cloud servers. Soon, even automated systems written in Western software will be converted to CCP-developed software. Aerospace and aviation technologies will also shift completely to be CCP-centric.
He remarked that the CCP aims to ensure there are no foreign components in their software and hardware to prevent other countries from implanting backdoors. Since the CCP’s territorial bases are hubs for hackers and they know Western software has vulnerabilities, without access to the source code, they cannot guarantee there aren’t pre-set backdoors by Western entities.
“In this scenario, the risk of leakage of confidential documents among government units warrants prioritizing security,” Su emphasized.
Su Ziyun also indicated that the CCP has economic considerations; once these pilot programs are mature enough with established specifications, they aim to export to authoritarian countries similar to China. Previously, Huawei and ZTE exported social credit and surveillance systems, including evaluation systems to autocratic nations like Venezuela in South America and the Middle East.
“While this strategy shows a balance between the market and national security, once all technological sources are severed, and they have to start from scratch, alongside the non-democratic CCP system, it could stifle innovation capabilities. Hence, the CCP becomes the biggest hindrance to creativity. Historically, stifling creativity does not lead to sustainable progress in human civilization,” Su warned.
Chinese mainland telecom servers are gradually replacing American products, with servers categorized into three series: A, I, and G. A-series refers to servers with AMD chips, I-series with Intel chips, and G-series with domestic chips.
In 2018 and 2019, Chinese telecom purchases mainly comprised servers with Intel CPUs. However, in 2020, Chinese telecom’s server purchases shifted to servers using domestic CPUs. The G-series accounted for 19.9%, while the I and A series represented 79.4% and 0.7%, respectively.
According to a report in 2023 by China Business News, China Telecom’s research laboratory announced the development of 5G standalone small base stations with a 100% domestically produced chip and component rate. Unlike small terminal device chips like smartphones, communication base station chips do not require excessively high manufacturing processes.
Su Ziyun mentioned that this repeated practice in China over the past forty years involves introducing foreign technology under joint ventures, mastering the technology, then kicking out foreign capital partners. This cycle undermines the credibility of CCP enterprises, discouraging foreign investments and joint technological ventures.
“Hagong and Kungpeng CPUs can be considered the Byd of the IT world. Whether Kungpeng or Hai Guang, their basic architecture and software command set come from the ARM system. However, the challenge comes in expanding; processors like Hai Guang or Kungpeng have reached their limit at 7nm, preventing further advancements without access to new tools,” Su explained.
“By opting for wholly autonomous software and hardware, the CCP faces significant risks from a risk perspective. Developing advanced machinery could take 20 to 25 years. If it can’t access new toolsets, further progress may be stunted,” Su noted.
Su Ziyun remarked that politics is the CCP’s major shortcoming. The ongoing technological blockade already exerts immense pressure, and the directive to prioritize domestic chip procurement will exclude foreign firms, potentially prompting support for further containment against the CCP. For example, Elon Musk has openly promised tariff blockades concerning CCP electric vehicles, underscoring the CCP’s high-risk strategy.
Regarding the CCP’s motivations behind implementing the Xinchuang Plan to clear American technology, Feng Chongyi believes the root cause is political. The CCP, aiming to secure its power and ideological stance against the liberal-democratic world led by the US, intends to engage in a power struggle.
He mentioned that Xi Jinping not only aims to control China but also the world eventually. Realizing a confrontation with the US and the West is inevitable, the CCP created this plan, similar to the previous Made in China 2025 initiative. A prime example is the CCP’s extensive effort in developing the Beidou system while the US dismantled Iraq’s entire command system effortlessly during the Iraq invasion.
“This plan serves the CCP’s ambition for global dominance. If the US cannot be defeated, then at least a parallel world exists where I dominate with third-world nations in my favor,” Feng stated.
The CCP’s scheme of shifting blame to the US is problematic because the Western blockade is a result of the CCP’s actions to disrupt international order, change trade rules, and alter the world’s landscape, undermining liberal democratic systems. The mainstream world cannot allow this.
“The harm to the Chinese nation is immense. After finally benefiting from globalization and integrating into the global economy, experiencing intellectual achievements, the imposed isolation risks stifling the nation’s intellectual resources, knowledge, and open-mindedness,” Feng elaborated.
Feng Chongyi further explained that history serves as a lesson, emphasizing Mao’s pursuit of self-reliance and independence, which led to China’s severe impoverishment. However, with reform and opening up, China fostered relationships with the West, obtained technology in exchange for market access, resulting in rapid economic growth. By embracing globalization, the country’s technology and industry levels thrived, aligning with Western advancements, improving living standards and quality of life.
Yet, the CCP’s current direction of reverting to autocracy to maintain power stifles China’s development, detaching itself from mainstream civilization and modernization, denying the Chinese people the opportunity to participate in international progress and advancements.
“It’s essential to separate China from the CCP regime,” Feng emphasized.
Editor: Lin Yan#