Trade groups: China moving forward on controversial cyber rules

Trade groups: China moving forward on controversial cyber rules

China may be moving forward after all with a set of controversial bank-technology rules, just two weeks after U.S. officials said Beijing had decided to delay the regulations.

U.S., European and Japanese trade groups revealed the details in a letter — obtained by several media outlets — sent to top Chinese officials on Monday. Foreign businesses say the law would discriminate against them.

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The new guidelines would require technology firms working with Chinese banks to turn over all source code and encryption to Beijing officials for inspection. The mandate is a subset of broader counterterrorism laws intended to defend China’s cyberspace from attack, but that trade groups argue will restrict foreign companies’ ability to operate in the country.

“Chinese banks are continuing to implement new procurement practices favoring domestic products and services consistent with the guidelines, creating urgent challenges for companies whose products and services are affected by them,” said the letter, which included the U.S. Chamber of Commerce and the Consumer Electronics Association, The New York Times reported.

The realization undercuts what appeared to be progress by the international community in slowing the controversial rules.

Treasury Secretary Jack LewJacob (Jack) Joseph LewOvernight Finance: US reaches deal with ZTE | Lawmakers look to block it | Trump blasts Macron, Trudeau ahead of G-7 | Mexico files WTO complaint Obama-era Treasury secretary: Tax law will make bipartisan deficit-reduction talks harder GOP Senate report says Obama officials gave Iran access to US financial system MORE spent much of his late March trip to China discussing the rules with top Chinese officials. Following the meetings, American officials said the guidelines would be delayed.

“We made clear that suspending them is the right approach,” Lew told reporters at the time. “I think the need for a process to resolve this is necessary because even as they're pending, it causes a difficult environment for American businesses trying to do business in China.”

It’s not the first time U.S. officials have indicated China was taking a step back, only to have Chinese officials declare otherwise days later.

White House Cybersecurity Coordinator Michael Daniel, who has spoken out against the rules, said in early March that China was hitting pause on the broader rules to consider more input. Beijing quickly refuted his comments.

In the letter sent Monday, the industry coalition said Beijing was still not slowing down. Businesses “remain concerned that stakeholder input has not been fully considered,” the letter said, according to The Wall Street Journal.

The letter was sent to the Chinese Communist Party Central Leading Group for Cyberspace Affairs, which is headed by President Xi Jinping. President Obama has expressed his own reservations by phone to Xi.

The U.S. has also taken its frustrations to the World Trade Organization, asking Beijing officials to clarify their intent behind moving on the law.