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China is changing the rules for government departments which want to buy software produced outside the country.

Government purchasers must define software vendors as "domestic, non-domestic and preferred domestic", according to the FT.

Under new rules government departments wishing to buy foreign software will have to get special permission. The changes are designed to bolster China's domestic software industry but could breach international trade laws.

There are also tough definitions for software vendors to meet. At least 50 per cent of development costs must be spent in China for software to qualify as "domestic". To be a preferred supplier, companies must train local staff, invest revenues back into China and "transfer core software technology to China".

China's procurement rules came under the spotlight last year when Beijing Municipal Council came under fire for placing a big order for Microsoft software. The order was cancelled in favour of a local supplier after media complaints. But it later emerged that the council bought more Microsoft code than local software.®

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