Global Push Aims to Change China’s Mind on Bank Rules: US Official

Japan, the EU and the US are urging China to delay enforcing new rules “that would force technology vendors to Chinese banks to hand over secret source code and adopt Chinese encryption algorithms,” reports Krista Hughes for Reuters Canada. China expects those hoping to do business in the world’s most populous nation to abide by Chinese law. The rules – proposed as cybersecurity and counterterrorism protections – could largely block foreign vendors and ATMs from the huge Chinese market. Technology firms point out that the rules are protectionist and that China would be blocking its consumers and businesses from the best products and bank protections. Protesting nations are expected to raise concerns about the technical trade barrier with the World Trade Organization. – YaleGlobal

Global Push Aims to Change China's Mind on Bank Rules: US Official

China’s new rules on cybersecurity have upset foreign banks
Krista Hughes
Monday, March 23, 2015

WASHINGTON (Reuters) - The United States has joined forces with Japan and the European Union to pressure China on new bank cybersecurity rules that have upset foreign companies, a senior U.S. official said on Wednesday.

Deputy Trade Representative Robert Holleyman said the United States would keep lobbying China to put a hold on the rules, which would force technology vendors to Chinese banks to hand over secret source code and adopt Chinese encryption algorithms, until there was a "satisfactory resolution."

"We are working to try to break down those barriers, and we have also secured support from our allies and trade partners in Japan and the EU," Holleyman, who raised the issue with Chinese officials during a visit to Beijing last week, told the National Lieutenant Governors Association.

"This is not just a U.S.-led initiative; it's an important global initiative."

Asked about Holleyman's remarks, Chinese Foreign Ministry spokesman Hong Lei told reporters: "China's Internet development must also respect China's own laws and rules."

Brussels has also raised the issue with Beijing at the ministerial level and plans to flag its concerns at the World Trade Organization's next meeting on technical trade barriers.

"The EU is concerned by the lack of transparency in the development of these measures and by the potential impact on EU companies," a European Commission spokesperson said.

Chinese banks had until Sunday to submit plans for how to comply with the new regulations, which Holleyman said would largely shut U.S. technology and ATM providers out of the Chinese market. Washington is also pressing for China to pause the implementation of a draft counterterrorism law which could hit IT companies as well.

Victoria Espinel, who succeeded Holleyman as president of lobbying group BSA The Software Alliance, said the U.S. industry was working "very closely" with colleagues overseas.

"What we have been doing very successfully (is) to make clear towards the United States government, the European government, the Japanese government (and) the government of China that this is a concern," she said.

"It is not good for Chinese companies to be cut off from being able to choose the best products and services they want, it's not good for China ... as an economy."

U.S. State Department Under Secretary for Economic Growth Catherine Novelli said the combined approach should pay dividends.

"Hearing these things from so many different channels is the proof that ... this actually is the generally widely held view of those who know about technology," she said earlier this month.


Additional reporting was by Phil Blenkinsop in Brussels and Ben Blanchard in Beijing.

© Thomson Reuters 2015 All rights reserved. Reprinted by permission.