Tens of millions of devices will need to be replaced, but it isn't as simple as trading out HP machines for Chinese-manufactured ones.
The order came from the ruling Chinese Communist Party's Central Office earlier this year, said the analysts.
Neither China Securities nor the Chinese State Council immediately responded to emails from the post Monday morning. The policy is expected to significantly impact tech giants HP, Dell and Microsoft.
Chinese government agencies and critical infrastructure providers such as telecom operators and power grids must start allocating a certain ratio of information technology procurement contracts to domestic suppliers, the people said.
"That is something that China is looking at to make sure government operations are not affected by escalating tensions with the U.S.", Campling told CNBC.
News of such a ban threatens to worsen the U.S.
The trade war runs the risk of aggravation with new impositions if Washington and Beijing do not reach an agreement before the end of this year.
The move mirrors attempts by the USA government to ban Chinese companies from its supply chain and infrastructure. Other Chinese companies were also blacklisted. China has made its desire to establish independence from USA companies especially quite clear and many state-backed enterprises have been unable to use US suppliers for some time.
US President Donald Trump's aggressive policies against China and its leading companies have given this effort renewed urgency. It was recently proposed by the United States that technology sales into the US from "foreign adversaries" would be investigated for national security threats.
The ZTE restriction has since been lifted, but the us has continued to blacklist other Chinese companies.
Analysts estimate USA technology companies generate as much as US$150 billion a year in revenues from China, although much of that comes from private sector buyers.
USA companies like Google and Facebook have been blocked from operating in China for several years.
As per the FT report, the directive would result in an estimated 20 to 30 million pieces of hardware being replaced starting 2020. All things considered, the FT utilizes Lenovo for instance: a Chinese organization that sources chips from Intel (US) and hard-drives from Samsung (Korea).
"From China's perspective it is the only effect it can take, but doing so will be hard in practice given for instance Microsoft's dominant position in the desktop", Mueller said. Huawei released its own operating system called HarmonyOS earlier this year, but it's unclear whether it would be suitable for government use.
The Huawei ban meant that the $11 billion that the company spent every year for things like semiconductors, peripherals, and software made in America immediately flew out the window. The order indicates a wider move of China to increase its reliance on domestic technology. The move has angered Beijing.
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