China's encryption rule could shut U.S. businesses out of big market

European leaders were considerably more aggressive in their reaction, describing China's new plan as one without a "real base in reality."

"We cannot see what they see in regard to security, so we are in fact disputing this," Karel De Gucht, an European Union trade commissioner, told The Wall Street Journal this week.

But most concerned is the U.S. tech community, which regards the encryption debate as the latest in a series of concerning and unprecedented moves by the Chinese.

"The problem we're facing here is part of broader, systemic problem we're having with China veering from global approaches and not fully integrating with global economy," said John Neuffer, the Information Technology Intdustry Council’s Vice President for Global Policy. "It's been a sustained effort across the board to steer China toward adoption of global approaches."

Earlier this year, many of those businesses and trade groups pushed congressional lawmakers to fight China's "indigenous innovation" plans -- essentially, new procurement rules that require government agencies to purchase equipment only from businesses that develop and register their intellectual property patents locally.

ITIC is among many that have since pushed the Obama administration to confront China on the issue during next months talks, they told The Hill in February. Their concerns have so far caught the attention of at least one lawmaker, Rep. Howard Berman (D-Calif.), who later aired his gripes with the Chinese ambassador.

"This new program would run directly counter to the joint commitment of our two presidents to open trade and investment at their recent meeting in November," he wrote in letter.

China has yet to relax those indigenous innovation rules. But if Bejing does, ultimately, heed U.S. and European calls on its new encryption standard, this weekend would mark the second time officials in Beijing have postponed and relaxed their encryption deadline. International criticism when the rule was proposed in 2008 prompted the Chinese government to scale back its original plans to require all tech manufacturers to submit their encryption data.

"We are pressing for a delay, we would like them to delay again," Neuffer told The Hill on Wednesday, "but it's very unclear to us what's going to happen."