Why an Increasing Number of U.S. States are Banning China Tech

An increasing number of U.S. states are banning China technology brands from government offices – whether that’s a Lenovo laptop, TikTok on government-issued phones or Motorola, now owned by a Chinese company.

This week, the China watchdog group, China Tech Threat (CTT), released a 24-page report listing the local state governments taking action, and why they’ve been doing so. On Thursday, they held a webinar about that report, titled “States of Denial versus States of Momentum.” Republican Georgia state representative Martin Momtahan was one of the speakers: “We had Chinese tech in our local government for years and we knew there were vulnerabilities there that needed correction. Some state leaders have been actually extorted from data that was swept from China IT devices,” he said. “Both Democrats and Republicans agree this is a big issue.  We passed a bill that was pretty strong in Georgia.”

The host of the event, a retired Army Major General and principal at China Tech Threat, James “Spider” Marks called Momtahan an “icebreaker” with this Georgia law.

“States should not contract with CCP-owned companies like Huawei, or even Motorola now,” Momtahan said on Thursday. “You can’t do business with them. It’s a direct threat as found by Georgia state investigators, the FBI, and others. The question is how the Chinese are using data, and images from those cameras, to extort you,” he said, adding, “This isn’t make-believe.”

The main companies mentioned in the webinar and in the report were Lenovo computers and Lexmark cloud services. Lexmark is mostly known for printers. It was purchased by Apex Technology and PAG Asia Capital, a private equity firm, in 2016. Lenovo is the old IBM Think Pad and was sold in 2005. Lenovo bought Motorola in 2015.

Today five states have laws or restrictions governing state contracts with these companies, with 11 additional states currently considering legislation.

Some of the key findings from the China Tech Threat report reveal that Chinese companies currently banned or restricted from U.S. military and national security networks are still allowed to sell to state governments.

Lexmark and Lenovo can access sensitive personal and financial information held by courts, policed departments, elections departments, education departments, children and family services, and other social service providers and agencies, the report stated.

In the case of Hikvision and Da Jiang Innovations (DJI), they can also collect facial recognition and critical infrastructure data.

Despite greater awareness of national security vulnerabilities, state government contracts and purchases from Lexmark and Lenovo have continued. In some cases, purchases have increased since China Tech Threat issued its first state contracts report in 2020.

According to China Tech Threat, their latest review of contract information and public databases from 28 states shows a combined $230 million worth of contracts for Lexmark or Lenovo have been issued since 2015, with individual states spending as much as $47 million.

Actions such as Georgia Senate Bill 346 last February and Florida Executive Order 22-216 which was issued in September have piqued interest in other state capitals. There is a new wave of state government action to ban Chinese IT systems from government contracts. This year is expected to see 11 more states take up legislation to follow in Georgia’s footsteps, namely Arkansas, Indiana, Kansas, Maine, Mississippi, Montana, New Hampshire, Oklahoma, South Carolina, South Dakota, and Virginia.

In May 2022, Georgia Governor Brian Kemp signed the law prohibiting Chinese “owned or operated” companies from bidding on state contracts. In July 2022, two task forces of the American Legislative Exchange Council unanimously adopted the Georgia law as the basis for model policy for other states.

Florida Governor Ron DeSantis’ executive order prohibits Florida state and local government entities from procuring technology products and services from companies owned by, controlled by, or headquartered in China. The executive order directs the Florida Department of Management Services to create rules and take additional action necessary to ensure commodities and services used by Florida’s state and municipal governments are not susceptible to exploitation by “foreign countries of concern.”

It’s important that states do not focus legislative efforts on banning specific Chinese companies, because these companies will just create outposts in Southeast Asia, and open subsidiary branches there under new corporate names.

“America is a federalist nation which is generally a good thing, but makes for dealing with issues like these challenging,” said Robby Smith Saunders, Vice President of National Security at the Coalition for a Prosperous America. “States look to the federal government on matters of national security, but the federal government has limits. I commend the wonderful work of CTT because they are doing what needs to be done — going to the states, educating, and empowering state lawmakers to pass legislation that changes their state’s landscape on the threats posed by the CCP and CCP-linked companies. More of that needs to happen. It is well beyond time to close the gaps in U.S. law that allow for companies like DJI or Hikvision to be only partially blocked or partially banned. If the U.S. Commerce Department bans certain companies from doing business with the U.S. and requires special export licenses, then those same concerns and bans should apply to doing business with the states – and also for Wall Street,” she said.

The China Tech Threat report gives a brief history of the tech companies, led by Lenovo, and what has brought about their bans by numerous government departments such as the Department of Defense.

The report also provides an extensive list of resellers of these products. These resellers are often the ones that are awarded government contracts at the state level and then provide the government with the Chinese facial recognition software that is on the Commerce Department Entity List or Treasury Department’s capital market sanctions list, for example. Tech Crunch was the first to report on these purchases in May 2021.

The China Tech Threat report concludes with five recommendations for states to improve upon existing legislation in states like Georgia.

China Tech Threat says lawmakers should be vigilant against import lobbying efforts that attempt to persuade state legislators that China-focused actions are bad for climate policy (as is used in the case of solar imports) or “hurt the feelings of the Chinese people” – a common phrase Beijing once employed back in 2017 prior to the imposition of tariffs on Chinese imports by the Trump Administration.