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China Ousts Foreign Servers for Local Brand, People’s Daily Says

July 4 (Bloomberg) -- China is replacing imported servers after the successful trial of a local brand by a state-owned bank as the nation steps-up a campaign for information security, the official People’s Daily newspaper reported today.

Inspur Group Ltd.’s Tiansuo K1 system has replaced imported servers “in large quantity” after its successful use by China Construction Bank Corp.’s Xinjiang branch, People’s Daily reported, citing Wang Endong, chief designer of the system. The paper is the official newspaper of China’s Communist Party.

The branch started testing the hardware in August 2010 and used the system for all businesses in 2011, replacing hardware from International Business Machines Machines Corp., the report said, citing Lin Leiming, a deputy manager in CCB’s information technology department. More industries including power, oil and agriculture will start to use Inspur’s Tiansuo K1 system, according to the report, which didn’t provide details and cited Wang for the information.

Anthony Guerrieri, a Shanghai-based IBM spokesman, couldn’t be reached by phone and he didn’t immediately respond to e-mailed request for comment on the report.

The Chinese government is reviewing whether domestic banks’ reliance on high-end servers from IBM compromises the nation’s financial security, while government agencies including the People’s Bank of China and the Ministry of Finance are conducting a trial replacing IBM servers with Inspur, Bloomberg reported in May, citing people familiar with the matter.

IBM isn’t aware of any Chinese government policy recommending against the use of IBM servers within the country’s banking industry, Jeff Cross, a spokesman for IBM, said in a statement in May responding to that report.

IBM and other foreign vendors including Hewlett-Packard Co. and Oracle Corp. held 99 percent of China’s server market before the Tiansuo K1 system, the People’s Daily reported.

Tensions over cyber security between the U.S. and China have been rising since May, when U.S. prosecutors charged five Chinese military officers with allegedly hacking American companies to steal corporate secrets.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net Aaron Clark, John Liu

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