What is behind Cisco’s apparent dramatic recovery in China?


Cisco Executive Chairman John Chambers has offered some very interesting comments to a Reuters reporter in Dubai. He said that Cisco’s business was up by 40% in China in the third quarter. This would reflect a very dramatic turnaround as Cisco’s business in China had been tumbling after the company became one of the main targets of China’s quest for “secure and controllable” technology (replacement with Chinese products) in the wake of Snowden cyberspying revelations. Reuters reported earlier this year that Cisco’s products were being pulled from government procurement lists. But the situation seems to have changed.

Chambers told Reuters: “We spent three years winning the trust of the Chinese government and if you watch most American companies, their businesses in China is down dramatically, so was ours for several years. Do you know how much we grew in China last quarter? Forty percent.”

In June, various news reports said that senior Cisco executives in China had been removed. Then the company announced plans to invest $10 billion in Chinese high tech industries. This was part of a MOU signed with the National Development and Reform Commission in which Cisco agreed to cooperate with Chinese firms and government entities to enhance Chinese innovation, R&D, tech investments and job creation.

During President Xi Jinping’s recent US visit, Chambers was present for the Seattle tech confab and photo opportunities with President Xi. The company had earlier announced a $100 million joint venture with its leading local competitor, the Inspur Group. Inspur is said to hold 51% of the equity. Sun Pishu, the CEO of Inspur, was a member of President Xi’s delegation. The joint venture involves hardware and software development and Inspur reselling Cisco’s equipment in China. In July, Inspur had announced it would invest RMB 10 billion to build seven core cloud computing centers and 50 regional cloud centers in China.

So, is the spike in Cisco’s sales in China a result of selling equipment through — and to — a local competitor which is also investing huge money in cloud computing centers? Foreign tech leaders are finding themselves walking down winding paths to do business in Chinese these days.

This post originally appeared on LinkedIn.


About James McGregor
James McGregor is an American author, journalist and businessman who has lived in China for more than 25 years. Currently, he is chairman of APCO Worldwide, Greater China. A professional speaker and commentator who specializes in China’s business, politics and society, he regularly appears in the media to discuss China-related topics. McGregor is the author of the books "No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism" (2012) and "One Billion Customers: Lessons from the Front Lines of Doing Business in China" (2005). He also wrote the 2010 report "China’s Drive for ‘Indigenous Innovation’ – A Web of Industrial Policies." From 1987 to 1990 McGregor served as The Wall Street Journal’s bureau chief in Taiwan, and from 1990 to 1994 as the paper’s bureau chief in Mainland China. From 1994 to 2000, he was chief executive of Dow Jones & Company in China. After leaving Dow Jones, he was China managing partner for GIV Venture Partners, a $140 million venture capital fund specializing in the Chinese Internet and technology outsourcing. In 1996, McGregor was elected as chairman of the American Chamber of Commerce in China. He also served for a decade as a governor of that organization. He is a member of the Atlantic Council, Council on Foreign Relations, National Committee on US-China Relations and International Council of the Asia Society. He serves on a variety of China-related advisory boards.

4 Responses to What is behind Cisco’s apparent dramatic recovery in China?

  1. Techinasia says:

    So China’s tactics worked. It sounds like Cisco’s decades of knowhow were given away to nurture a long term fierce competitor for driving up short to medium term growth. Retirement comes and it’s the successor to deal with the potential lethal threat down the road…

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