Western technology companies fear new regulations will force them out of the Chinese market

Hong KongNew regulations requiring foreign companies that supply computer equipment to Chinese banks to hand over source code, build backdoors into hardware and software, and submit to invasive audits have been widely condemned in the West.

Beijing is insistent that the new regulations are being introduced only to strengthen cyber security. Foreign business groups, however, have objected to the intrusive regulations, saying that they amount to protectionism and are a way of forcing them out of one of the world’s largest and fastest-growing markets.

Companies “planning to sell computer equipment to Chinese banks would have to set up research and development centres in the country, get permits for workers servicing technology equipment and build “ports” which enable Chinese officials to manage and monitor data processed by their hardware”, according to Reuters.

In a letter addressed to the Central Leading Small Group for Cyberspace Affairs – which is led by Chinese President Xi Jinping – the groups, including the US Chamber of Commerce, called on senior Chinese government officials to delay implementing the new rules and “grant an opportunity for discussion and dialogue for interested stakeholders with agencies responsible for the initiatives”.

“The domestic purchasing and related requirements proposed recently for China’s banking sector… would unnecessarily restrict the ability of Chinese entities to source the most reliable and secure technologies, which are developed in the global supply chain,” the letter said.

“Our concern is not with the goal of enhancing security, but with the means to reach it. An overly broad, opaque, discriminatory approach to cybersecurity policy that restricts global Internet and ICT products and services would ultimately isolate Chinese ICT firms from the global marketplace and weaken cybersecurity.

“In line with China’s World Trade Organization commitments, it is of critical importance that policies be developed in a transparent and open manner.”

Ongoing tensions

Tensions between China and the US over cyber security have been running high over the last year.

As the BBC reports, “Beijing denounced US charges against Chinese army officers accused of economic cyber-espionage” last May, and “also alleged that the US National Security Agency spied on Chinese firm Huawei, while the US Senate claimed that the Chinese government broke into the computers of airlines and military contractors.”

China’s reliance on foreign technology is viewed as a security weakness in Beijing, especially “following Edward Snowden’s revelations that that US spy agencies planted code in American-made software to snoop on overseas targets.”

More information

21st Century Chinese CyberwarfareFor more information on Chinese government cyber initiatives – as well as a timely examination of the threat of state-sponsored cyberwarfare – read 21st Century Chinese Cyberwarfare.