BEIJING (BLOOMBERG) - China is accelerating plans to replace American and foreign technology, quietly empowering a secretive government-backed organisation to vet and approve local suppliers in sensitive areas from cloud to semiconductors, people familiar with the matter said.

Formed in 2016 to advise the government, the Information Technology Application Innovation Working Committee has now been entrusted by Beijing to help set industry standards and train personnel to operate trusted software.

The quasi-government body will devise and execute the so-called "IT Application Innovation" plan, better known as Xinchuang in Chinese.

It will choose from a basket of suppliers vetted under the plan to provide technology for sensitive sectors from banking to data centres storing government data, a market that could be worth US$125 billion (S$170 billion) by 2025.

So far, 1,800 Chinese suppliers of PCs, chips, networking and software have been invited to join the committee, the people said, asking not to be identified discussing private information.

The organisation has so far certified hundreds of local companies this year as committee members, the fastest pace in years, one of the people said.

The existence of the Xinchuang white-list, whose members and over-arching goals have not been previously reported, is likely to inflame tensions just as Chinese President Xi Jinping and United States President Joe Biden wrapped up their first face-to-face virtual summit.

It gives Beijing more leverage to replace foreign tech firms in sensitive sectors and quickens a push to help local champions achieve tech self-sufficiency and overcome sanctions first imposed by the Donald Trump administration in fields such as networking and chips.

"China is trying to develop homegrown technologies," said Gavekal Dragonomics' technology analyst Dan Wang. "This effort is more serious now that many more domestic firms now share that political goal, since no one can be sure that US technologies can avoid US export controls."

The push to replace foreign suppliers is part of a broader effort by Beijing to exert control over its sprawling technology industry, including over data security. Already, the government has forced overseas cloud providers such as Amazon Web Services and Microsoft to set up joint ventures to operate on the mainland.

Apple has also yielded its user data storage business to a government-backed operator in Guizhou in southwest China.

The grip is set to tighten, as the tech industry ministry gains more oversight of industrial and telecom data as well as proposes new rules that will require crucial data to be stored within the country.

While few details have been revealed about the Xinchuang committee or its members, any companies that are more than 25 per cent foreign-owned will be excluded from the panel, shutting out overseas suppliers including Intel and Microsoft.

Chinese tech startups that are primarily funded by foreign investment will also face a higher bar, though Alibaba Group Holding and Tencent Holdings, the country's two largest providers of cloud services, have managed to circumvent those rules by applying for membership through locally incorporated subsidiaries, the people said.

"US choke-hold policies, exemplified by the Entity List, were the direct catalyst that pushed China to build the Xinchuang sector," Shanghai-based research firm iResearch said in a report in July.

"The blacklisting underlined the urgency for China to invest more in technology innovation and have the key technologies made in China."

The Ministry of Industry and Information Technology as well as the China Electronics Standardisation Association, which oversees the committee, did not respond to requests for comment.

Alibaba representatives did not immediately respond to a written request seeking comment. A Tencent spokesman declined to comment.

The committee had 1,160 members in July 2020, according to Netis, a cloud company that said it passed a complex review process. Other prominent companies include Beijing-based CPU maker Loongson, server maker Inspur, and operating systems developer Standard Software.

Westone, an information security company that could potentially be tasked by Beijing to take over Didi Global's data management, is also a member.

Membership on the panel could give local suppliers a key advantage in having their technology approved under the Xinchuang plan, thus unlocking a billion-dollar market. Xinchuang-related business generated 162 billion yuan (S$34 billion) in sales last year and is on track to reach nearly 800 billion yuan by 2025, according to a report co-authored by the China Software Industry Association.

"In every sector of the Xinchuang industry, there's a significant imbalance between supply and demand," it said. "Suppliers need to press the gas pedal to the floor in order to meet the demand."

In September, the Xinhua-backed Economic Information Daily newspaper listed 40 top performers of the Xinchuang project, which included Huawei Technologies, Alibaba's cloud unit, and network security company Qi An Xin Technology Group.

In an April list of 70 model cases in the Xinchuang industry, the Ministry of Industry and Information Technology praised Alibaba's "100 per cent self-developed" cloud platform for "providing a safe, trustworthy digital infrastructure for all levels of governments".

Communist Party entities, the government and military will be the first to adopt Xinchuang products, followed by financial and state-owned companies, according to iResearch.

"Xinchuang can't be built in one day, it's a long-term strategy that helps China grow its own IT technologies," the report said.