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The Chinese government wants domestic banks to remove their IBM servers and replace them with a locally made brand.

The Chinese government wants domestic banks to remove their IBM servers and replace them with a locally made brand, according to reports

The move is being seen as an escalation to the state spying dispute between the two countries, although Beijing is said to feel IBM's high-end servers are "overpriced" in China compared to other countries in the region.

According to BusinessWeek report says the People’s Bank of China and the Ministry of Finance are reviewing whether China's commercial banks’ "reliance" on IBM servers compromises the country’s financial security.

Earlier this month, US prosecutors indicted five Chinese military officers for allegedly hacking into US companies' computers and stealing trade secrets. In what was seen as retaliation, China’s government said it would block foreign technology companies operating in the country if their products did not come up to the state's cybersecurity standards.

It was also reported this month that Cisco networking products being sent into China could have been interfered with by US spying agencies. And the Financial Times last week reported that China had ordered state-owned companies to cut ties with US consulting firms.

No one from IBM has so far commented on the reported threat to its Chinese banking server business. Earlier this year, IBM said it was selling its lower-end server business China's Lenovo Group, the same company it sold its PC business to many years ago.  

The Businessweek report says that if IBM is pushed out, China's Inspur Group, which already provides servers to Chinese banks, would be in the frame to pick up the work.