China formally directs public institutions to only use domestic AI chips

China has officially ordered all state-run institutions to start using locally made AI chips, shutting out Nvidia just days before Donald Trump, now back in the White House, cleared limited exports of Nvidia’s H200 processors to select Chinese buyers.

This new directive, confirmed by two individuals who reviewed the government’s guidance, adds chips from Huawei and Cambricon to the Information Technology Innovation List, a procurement guide for all state-linked entities.

The directive, which comes from the Ministry of Industry and Information Technology, tells agencies, state-owned companies, schools, and hospitals to start sourcing their AI chips from domestic suppliers.

While these groups had previously been encouraged to “buy local,” this marks the first time they’ve received a written order. The list, widely known in China as Xinchuang, has already been circulated internally, though it hasn’t been released to the public yet.

China orders public sector to stop buying Nvidia chips

This move, according to the Financial Times, is aimed at ramping up national use of homegrown semiconductors, and it’s expected to lead to billions of dollars in new orders for local chipmakers.

The decision was rolled out just before Trump made his announcement on Monday, lifting certain U.S. export controls to let Nvidia resume shipments to “approved” customers in China.

But Nvidia’s actual sales may still face hurdles. Multiple lawmakers in Washington have signaled concern about exporting high-end chips to China, and Beijing might block imports anyway now that this new list is in force.

Beijing has spent the last few years using Xinchuang to slowly erase foreign hardware and software from the public sector.

The list already includes Chinese-made CPUs meant to replace AMD and Intel, and local operating systems that can run in place of Windows. Those policies have led to American tech products being quietly phased out of thousands of government offices, universities, hospitals, and major state firms.

Now, AI chips are being added to that purge. Officials involved in implementing the policy said this means public-sector systems will soon stop using Nvidia’s gear altogether. In preparation, the government also expanded its energy subsidy program for the country’s biggest data centers.

Some operators, especially those hosting Alibaba and Tencent infrastructure, can now get up to 50% off their power bills, offsetting the higher electricity costs that come with using less efficient domestic chips.

For now, Nvidia’s H200 return sits in a narrow window.

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