The Chinese government has instructed all government agencies to stop using foreign technology, both software and hardware, within three years. The move is likely a reaction to Donald Trump’s isolationist policy, which is blocking the use of Huawei technology in the US.

According to the Financial Times (FT), the new rules are part of a broader campaign to increase China’s technological independence. Economists are concerned about the ‘decoupling’ of trade relations between the US and China. This has potentially major economic consequences.

Tensions running high

Earlier this year, Washington banned American companies from doing business with the Chinese manufacturer Huawei. Ways of providing financial support to Huawei’s European competitors are also being looked at, according to the FT. In addition, the U.S. has recently proposed to screen the sales of technology by “foreign opponents” to the U.S., because of national security interests. Moreover, European allies are under pressure not to use Huawei technology in new 5G infrastructure projects, or even to remove Huawei technology from existing infrastructure.

Analysts at China Securities estimate that 20 to 30 million hardware objects will need to be replaced in China as a result of the new rule. In addition, the replacements should take place by 30% in 2020, 50% in 2021 and 20% in 2022. That is why this policy is also referred to as the 3-5-2 policy.

The 3-5-2 policy is part of the plan to allow Chinese government agencies and users of critical infrastructure to use “secure and controllable” technology. This was conceptualised in a Chinese ‘Cyber Security Law’ from 2017. It is apparent that American technology is no longer seen as either safe or controllable.

The recent American sanctions have drastically increased the urgency with which the Chinese project will be carried out, says Paul Triolo of consultancy company Eurasia Group.