China's 'Delete America' Directive Expands to Cybersecurity: VMware, Fortinet, and U.S. Vendors Blocked from State Entities

China's systematic effort to decouple its critical infrastructure from Western technology has reached the cybersecurity sector. According to a Reuters report citing two unnamed sources, Beijing has directed state-owned enterprises and government offices to stop using cybersecurity software from U.S. and Israeli vendors. The directive specifically names VMware (now under Broadcom), Palo Alto Networks, Fortinet, and Israel-based Check Point Software as affected vendors.

The ban is not merely a policy recommendation but a direct order, impacting companies with established physical operations in China and Hong Kong. This development aligns with China's long-term strategy to eliminate foreign dependency in key technological domains, a plan that has gained significant momentum in recent years.

The Xinchuang Initiative and 'Delete America' Directive

At the core of this policy shift is the Xinchuang initiative, a national strategy aimed at replacing all foreign software and hardware with domestic alternatives. The initiative, which has been in development for several years, was significantly accelerated by a 2022 directive known as Document 79. This document, informally referred to as "Delete America" or "Delete A," mandates the replacement of foreign software in critical areas by a 2027 deadline.

The scope of Document 79 is comprehensive, covering:

• Office automation and document management systems
• Human resources (HR) systems
• Customer relationship management (CRM) and enterprise resource planning (ERP) software
• Financial management platforms
• Core hardware, including servers and operating systems

The inclusion of cybersecurity software in this directive is a logical extension of the plan. Cybersecurity tools are integral to protecting sensitive data and infrastructure, and Beijing's concern is that foreign vendors could potentially leak Chinese information to foreign governments or third parties. This fear is not unfounded, given the complex geopolitical tensions and the precedent of U.S. export controls on advanced technologies like Nvidia's Blackwell chips.

Market Implications and Supply Chain Context

The immediate impact of this ban will be felt by the affected vendors, who must now navigate a rapidly shrinking market in China. Companies like VMware, Palo Alto Networks, and Fortinet have significant revenue streams from the Asia-Pacific region, and China represents a substantial portion of that market. The loss of state-owned enterprise and government contracts will force these companies to reevaluate their strategies in the region.

For the Chinese market, the ban accelerates the shift toward domestic cybersecurity solutions. Chinese companies such as Qihoo 360, Tencent, and Huawei are poised to fill the void left by Western vendors. This transition, however, is not without challenges. Domestic alternatives may lack the maturity and feature sets of their Western counterparts, potentially leading to a period of adjustment and increased investment in local R&D.

The broader supply chain implications are significant. China's push for technological self-sufficiency is not limited to software; it extends to hardware, particularly semiconductors. The country has invested heavily in chip-making technology to reduce its reliance on U.S.-designed and Taiwan-manufactured chips. This dual-track approach—restricting foreign software while boosting domestic semiconductor production—reflects a comprehensive strategy to insulate China's tech ecosystem from external pressures.

Geopolitical Context and Future Outlook

The U.S.-China tech rivalry has been escalating for years, with both sides implementing measures to limit each other's access to critical technologies. The U.S. has imposed export controls on advanced chips and AI technologies, while China has retaliated with restrictions on rare earth exports and now, cybersecurity software. This tit-for-tat dynamic suggests that the technological decoupling will continue to intensify.

The 2027 deadline for the Xinchuang initiative is fast approaching, and the latest cybersecurity ban indicates that Beijing is accelerating its timeline. For multinational corporations operating in China, this creates a complex regulatory environment where compliance with local laws may conflict with global operations. Companies will need to balance their international strategies with the realities of operating in a market that is increasingly closed to foreign technology.

In conclusion, China's ban on U.S. and Israeli cybersecurity software is a significant escalation in its campaign for technological independence. It underscores the growing divide between China and the West in critical infrastructure and cybersecurity. As the 2027 deadline approaches, the global tech industry will continue to feel the ripple effects of China's "Delete America" policy, reshaping supply chains and market dynamics in the process.

For further reading on China's technological initiatives, refer to the Xinchuang initiative overview and the Reuters report on the cybersecurity ban.