Technology companies are increasingly finding it difficult to do business in China

As we have seen in the earlier part of the series, leading US technology players like Cisco (CSCO), Apple (AAPL), and Microsoft (MSFT) are facing tremendous pressure from Chinese authorities. They are forced to agree to rigorous security checks before their products can be bought by China’s state-run financial institutions.

According to Reuters, China’s regulatory authorities have stated, “Firms planning to sell computer equipment to Chinese banks would have to set up research and development centres in the country, get permits for workers servicing technology equipment and build ‘ports’ that enable Chinese officials to manage and monitor data processed by their hardware.”

Why the H3C Sale Will Give HP an Edge Going Forward

Growth in China’s (FXI) economy coupled with increased penetration of third platform technologies points towards high growth in China’s server, storage, and networking equipment markets in the future. Third platform technologies refer to the social mobility, cloud, and big data/analytics, as the above chart shows.

IDC is of the opinion that, “local vendors and MNC’s will build the closer collaborative relationship as the IT localization trend.”

H3C’s research and development, manufacturing, and marketing operations are in China. For the new H3C, the change in ownership is expected to benefit the company in the long term. With the majority stake acquisition by Tsinghua Holdings, H3C now has a native parent company and not a foreign parent company (HPQ). This bodes well for HP’s future growth prospects in China, which now has a politically connected partner with Tsinghua Holdings. China continues to be a key Asian market for a majority of technology companies.

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