For American tech companies operating in China, the future looks uncertain as the Chinese government imposes new regulations. One such regulation is Document 79, which requires state-owned companies in finance, energy, and other sectors to replace foreign software in their IT systems by 2027. This directive aims at reducing China’s dependence on Western technology and advancing self-sufficiency for long-term security reasons.

The first wave of companies affected by this directive includes hardware manufacturers like Dell, IBM, HP, and Cisco Systems. These companies have experienced declining revenues as Chinese competitors replace their equipment. Even tech giants like Microsoft and Oracle are losing market share in China.

China’s push for self-sufficiency spans across various sectors, including critical technologies like semiconductors and fighter jets, as well as agricultural production. The goal is to make China less reliant on the West for food, raw materials, and energy, and instead focus on domestic supply chains.

In recent years, Chinese tenders have increasingly favored domestic tech products over Western brands. Analysts predict that this preferential demand from China’s state sector could further marginalize Western companies in the Chinese market. However, there are still opportunities for Western companies in areas where China lags behind in advanced technology and sales to multinational companies operating in China.

While American tech companies in China face challenges, the overall impact of China’s plan to replace foreign technology remains to be seen. Western companies will need to adapt and find new avenues for growth in this changing landscape.