Plan comes as both China and the US step up scrutiny of foreign technology firms

Cisco's $10 billion investment in China represents an attempt by the networking company to reverse its slide in the Chinese marketplace amid security concerns affecting technology firms in the United States and on the Chinese mainland, analysts said.

Cisco last week said it would invest the money in China with its local business partners over the next several years. A statement issued by the company did not provide specific spending details.

Cisco plans come as China and the US increase scrutiny of foreign technology firms. In China, the government is looking for ways to promote domestic technology suppliers following Edward Snowden's disclosure of a broad surveillance program by the US National Security Agency.

The US in turn banned Huawei Technologies Co Ltd - a rival to Cisco in China - from bidding for US government contracts because of espionage concerns.

Jayson Noland, managing director and senior analyst at Robert W. Baird & Co in San Francisco, told China Daily that at one time China represented 5 percent of Cisco's revenue. Cisco Chairman and CEO John Chambers said in May that orders from China fell by 20 percent during the quarter ended April 25 because of security tensions between the US and China.

"It's going to be tough for Cisco to win in China just as it will be tough for Huawei to win in the US," said Noland.

Earlier this year, a Reuters analysis found Cisco was among US technology firms that had been dropped from state procurement lists in recent years. "Cisco has struggled in China from a revenue perspective," Noland said. "Cisco sees China as a valuable market opportunity. I also think they wanted to recommit to China."

Kitty Fok, director of IDC China, said Cisco's performance in the country has been affected by the security issues and the US government's decision not to use products from Huawei.

"This planned investment is important for Cisco to show its commitment to China," Fok said. "The next question is whether it can get the right local partner."

As China increases its influence on the global information technology market, it will be important for Cisco to not only stay in China but continue to work with local companies and governments, she said.

Noland believes that Cisco, the world's biggest maker of switching equipment and routers that run the Internet, will focus the new Chinese investment on local area networks (LAN) and video conferencing.

"Some of the investment may include network security, but that will be a hard sell in China," Noland said.

Noland said the investment may produce a slight increase in back-office jobs in the US.

Cisco announced the investment plans following meetings between top company executives and Chinese government leaders.

Cisco also announced an agreement with the Association of Universities (Colleges) of Applied Science to advance the training of information and communications technology talent in China. Through the existing Cisco Networking Academy Program, Cisco will invest in a four-year program with 100 universities.

Gao Yuan in Beijing contributed to this story.

paulwelitzkin@chinadailyusa.com

(China Daily USA 06/23/2015 page3)