China's bid to curb public sector purchases of foreign-made software is likely to derail efforts to open up the mainland market to Hong Kong technology firms.
The proposed 'Implementation Rules of Government Software Procurement', drafted by the Ministry of Finance and the Ministry of Information Industry, directs all government organisations to buy duly certified 'domestic' software.
Although trade talks between the mainland and Hong Kong have pushed for stronger ties between the two markets, a preferential policy on software would shut out Hong Kong firms - just like multinational information technology suppliers - from highly sought government deals, experts said.
'Until further clarifications are made, the policy appears to have a negative impact on Hong Kong companies that want to sell their software to various government offices in China,' said Charles Mok, president of the Hong Kong Information Technology Federation.
'Hong Kong software companies do not enjoy 'national treatment' in the mainland. They are treated as foreign companies.'
There is a three-part test for software to qualify as 'domestic' under the proposed rules. The first requirement is that it be manufactured in China; second, the cost of developing the software in China must account for 50 per cent of the product's market value. Finally, the software's copyright must be owned by a legal Chinese entity or be first registered in China.