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US Firms Concerned About China's New Cyber Regulations

FILE - Computer users sit near a monitor display with a message from the Chinese police on the proper use of the Internet at an Internet cafe in Beijing, China.

FILE - Computer users sit near a monitor display with a message from the Chinese police on the proper use of the Internet at an Internet cafe in Beijing, China.

U.S. business groups have sent a letter to China’s top security policy body, calling for “urgent discussions” and “dialogue” over new cybersecurity regulations that would force them to hand over technology secrets in order to keep doing business in China.

Details of the letter’s contents that were leaked to the media say the new regulations would require technology companies doing business in the financial sector to hand over their source code and adopt Chinese encryption algorithms.

“The domestic purchasing and related requirements proposed recently for China’s banking sector… would unnecessarily restrict the ability of Chinese entities to source the most reliable and secure technologies, which are developed in the global supply chain,” the letter said.

More than a dozen U.S. business groups, including the American Chamber of Commerce, issued the letter.

The American Chamber of Commerce in Beijing confirmed that it was a signatory, but was unwilling to comment further. The group noted that those who signed the letter, agreed to not make it public.

Exact intent of new regulations unclear

According to The New York Times, China’s Central Leading Small Group for Cyberspace Affairs - which is headed by President Xi Jinping - approved a 22-page document late last year that contains the more stringent technology regulations for vendors.

The letter is the latest in a growing battle here between foreign technology firms and the Chinese government amid heightened concerns over cybersecurity. In the wake of disclosures about U.S. cyberactivities by former National Security Agency contractor Edward Snowden, China has been taking steps to limit its reliance on foreign technologies.

Some analysts say it is unclear whether China is just trying to give local companies, which still hold a smaller share in the financial sector, an added boost, or force foreign companies out of the market all together.

Harder to do business in China

What is clear, is that it has become increasingly difficult for foreign technology companies to operate in China over the past few years.

Last year, China banned Microsoft Windows 8 from government computers and launched an anti-monopoly investigation into the company. And Microsoft is not alone, other companies such as IBM, Oracle and others have been targeted as well.

Just days before Apple announced earlier this week that its iPhone sales set a new global record - boosted by sales in China - state media here were reporting about how the company had agreed to security checks.

An article in the nationalistic and Communist Party-backed tabloid, the Global Times said the country’s cyber watchdog, the Cyberspace Administration of China, had approached several U.S. technology firms, such as Google and Facebook, with the same demand. “These firms have had to leave the Chinese market because of their refusal to comply," the article said.