BEIJING, Aug 26 (Reuters) - Industrial and Commercial Bank of China (ICBC) has deployed a new IBM mainframe computer system that reduces downtime and will continue to buy equipment from IBM, the two companies said Tuesday.

IBM's joint announcement with ICBC, the world's largest bank by market capitalization, is an effort to signal IBM's ongoing business with China's state-owned banks and comes several months after widely circulated media reports suggested China's central government had ordered banks to remove IBM equipment due to cybersecurity concerns.

Seeking to recover from the public relations hit, IBM has announced in recent weeks a string of deals in China to assure investors of its future in the market as well as salvage its reputation with potential Chinese buyers.

In a statement released only in Chinese, ICBC chief technology officer Lin Xiaoxuan said ICBC "beginning 30 years ago was the first bank in mainland China to introduce IBM mainframes, which have since played an important role in our IT operations.

"IBM mainframes have consistently helped us keep our IT systems steady and safe and will continue to do so in the future," Lin said.

ICBC's newly deployed mainframe, which was purchased from IBM several months ago, allows sensitive financial data to be routed around the world in the event of a crash at one of its 40 global branches.

IBM Greater China Chief D.C. Chien told state-run China Daily newspaper in a recent interview that local banks have continued to purchase its products.

IBM additionally announced this week that it would team up with China Telecom to provide cloud computing services to small and medium-sized businesses.

Before the most recent public relations push, IBM said in April that sales in China had fallen by 20 percent, echoing disappointing results from many U.S. technology companies which saw their sales in China plummet following revelations by Edward Snowden of extensive U.S. government spying.

In an unexpected development, Inspur, a Chinese rival to IBM that marketed itself as a more secure option for Chinese banks, announced this week it will sell its high-end K1 server system with IBM's database and web application software installed.

(Reporting by Gerry Shih; Editing by Matt Driskill)