Beijing Tells Chinese Firms to Stop Using US and Israeli Cybersecurity Software, Sources Say

Chinese authorities have told domestic companies to stop using cybersecurity software made by roughly a dozen firms from the US and Israel due to national security concerns, two people briefed on the matter said.

As trade and diplomatic tensions flare between China and the US and both sides vie for tech supremacy, Beijing has been keen to replace Western-made technology with domestic alternatives.

The US companies whose cybersecurity software has been banned include Broadcom-owned VMware, Palo Alto Networks and Fortinet, while the Israeli companies include Check Point Software Technologies, the sources said.

Shares of Broadcom and Palo Alto Networks were down more than 1% in premarket trading, while those of Fortinet fell nearly 3%.

Reuters was not able to establish how many Chinese companies received the notice that the sources said was issued in recent days.

Chinese authorities expressed concern that the software could collect and transmit confidential information abroad, the sources said. They declined to be named due to the sensitivity of the situation.

China’s internet regulator, the Cyberspace Administration of China, and the Ministry of Industry and Information Technology had not responded to requests for comment at the time of publication. The four companies also did not reply to Reuters’ queries.

PREPARATIONS ARE UNDERWAY FOR TRUMP VISIT

The United States and China, which have been locked in an uneasy trade truce, are preparing for a visit by US President Donald Trump to Beijing in April.

Even before Trump’s return to power at the start of last year, the politics around foreign cybersecurity vendors has long been fraught.

While the West and China have clashed over China’s efforts to build up its semiconductor and artificial intelligence sectors, Chinese analysts have said Beijing has become increasingly concerned that any Western equipment could be hacked by foreign powers.

It has therefore sought to replace Western computer equipment and word processing software.

The country’s largest cybersecurity providers include 360 Security Technology and Neusoft.

Some of the US and Israeli companies facing a ban for their part have repeatedly alleged Chinese hacking operations, which China has denied.

Last month, Check Point published a report on an allegedly Chinese-linked hacking operation against an unidentified “European government office.” In September, Palo Alto published a report alleging a Chinese hacking effort targeted diplomats worldwide.

SIGNIFICANT CHINESE FOOTPRINT

The companies have built a significant footprint in China over the years.

Fortinet has three offices in mainland China and one in Hong Kong, according to its website. Check Point’s website lists support addresses in Shanghai and Hong Kong. Broadcom lists six China locations, while Palo Alto lists five local offices in China, including one in Macau.

Cybersecurity firms are often staffed with intelligence veterans, they typically work closely with their respective national defense establishments, and their software products have sweeping access to corporate networks and individual devices – all of which at least theoretically provides a springboard for spying or sabotage, analysts say.