Obama warns China on cyber rules

Obama warns China on cyber rules
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President Obama has gone straight to Chinese President Xi Jinping with concerns over upcoming Chinese cybersecurity rules that would require foreign tech firms to submit code for inspection.

“This is something that I’ve raised directly with President Xi,” Obama told Reuters in an interview. "We have made it very clear to them that this is something they are going to have to change if they are to do business with the United States.”

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The regulations are part of a Chinese counterterrorism law expected to go into effect in the coming months.

Under the rules, foreign tech companies operating in China would be required to install Beijing-approved encryption technology that gives the government access to data, allows inspection of all secret code and gives up any encryption keys.

U.S. companies have appealed to both the Chinese Communist Party and the White House, stressing that the law would impede their ability to operate in China and give Chinese officials unfettered access to sensitive data.

Obama backed the industry groups' argument.

The rules "would essentially force all foreign companies, including U.S. companies, to turn over to the Chinese government mechanisms where they can snoop and keep track of all the users of those services," Obama said.

“As you might imagine, tech companies are not going to be willing to do that,” he added.

The U.S. and China have repeatedly clashed over cybersecurity, with each accusing the other other of invasive cyber snooping.

Beijing has defended its increasingly restrictive cyber strategy as its right to protect its own cyberspace.

Obama said the move will have the opposite effect.

"Those kinds of restrictive practices I think would ironically hurt the Chinese economy over the long term because I don’t think there is any U.S. or European firm, any international firm, that could credibly get away with that wholesale turning over of data, personal data, over to a government," he said.

The pressure from private companies on the Obama administration to engage the Chinese on its new cyber rules is seen as one of the few things that could bring the two countries back to the table on cyber.

“If the U.S. increases the pressure on these new cybersecurity regulations, I think the Chinese would at least have to respond,” said Chinese cyber policy expert Adam Segal, a senior fellow at the Council on Foreign Relations, in mid-February after the rules were first revealed.

The two countries have not had an official cyber dialogue since the U.S. indicted five members of the Chinese military for hacking.