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China reconsiders controversial banking cyber regs

China reconsiders controversial banking cyber regs
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China has resumed consideration of controversial banking cybersecurity regulations that would require Chinese firms to buy more domestic IT and force foreign vendors to disclose proprietary source code.

Reuters first reported the shift.

The proposed procurement rules have been a persistent thorn in discussions with the U.S., and the revelation that they are back on the table comes just weeks before Xi Jinping is slated to make his first trip to Washington as president.

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In a Beijing meeting last week, China Banking Regulatory Commission officials told several Western tech companies — including Microsoft and IBM — that the commission is seeking opinions over the next month on a new version of the rules.

Implementation of the original regulations was suspended in April in response to heavy pushback from the international business community, the Obama administration and other foreign governments. At the time, it was considered a diplomatic victory for the U.S.

"It would be a significant barrier to U.S. companies doing business in China if they were to go ahead with the proposals pending," Treasury Secretary Jack Lew told reporters in Beijing after meeting with Chinese Vice Premier Wang Yang in late March. "And I think they heard the concerns."

The rules were originally intended to be part of a sweeping national security law that China approved in July. The legislation grants Beijing officials the power to make networks and computer systems “secure and controllable” — a vague authority that remains undefined.

China says it is protecting its political and social stability, but critics say it is part of an effort to insulate China’s domestic industries at the expense of foreign companies. In critical multinational industries such as banking, tight data restrictions could prove detrimental to global trade, experts say.

Some are not surprised that China has put the banking restrictions back on the table — especially in light of July’s across-the-board lawmaking.

“No one doubted they were going to come back," Reuters quoted a source familiar with last week's meeting. "We're all still trying to wrap our heads around it."

President Obama plans to bring up China’s digital behavior during his September meeting with Xi, which comes in the wake of the devastating hack on the Office of Personnel Management — an attack that the administration has attributed to China.