IT groups warn Chinese on regulation

The US and the European Union are pushing China to soften or drop plans for compulsory certification of a range of technology products, as foreign IT companies warn that Beijing’s regulatory requirements are pushing them out of the market.

The complaints come after Google’s announcement last month that it was reviewing the feasibility of operations in China, saying it had been attacked by hackers based there. This highlighted a broadening conflict between the Beijing and foreign business over information security and intellectual property.
Rules set to take effect on May 1 will exclude suppliers of encryption-related products such as firewalls, secure routers or smart cards from government tenders unless they undergo testing and certification to meet Chinese standards. In some cases this will require submitting software source codes and other confidential information.

Foreign businesses fear the authorities could pass information on to their state-owned competitors. They also argue thattheir products could become unsafe if Beijing used its knowledge of software architecture to install “back doors” for surveillance.
“To many it feels that the Chinese government is trying to get its hands on every bit of information that passes through this country,” said Joerg Wuttke, president of the EU Chamber of Commerce in China.
Beijing’s failure to announce implementation regulations leads some foreign companies to conclude that the objective is to lock them out of the market.

John Neuffer, vice-president for global policy at the Information Technology Industry Council, a lobby group, said: “The looming choice for many of our companies is to create costly bifurcated product lines, one for China and one for the rest of the world, or to ponder less ambitious trade and investment choices in that market.”

Industry sources and diplomats said they hoped for a compromise, especially as Beijing had shown flexibility last year. Following months of quiet lobbying, China agreed in April, just days before the rules were due to take effect, to delay implementation for a year and limit their scope to government procurement.
Deborah Mesloh, deputy US trade representative for public affairs, said: “Since then the US has continued to ask China to follow global norms in this area, and we are continuing those discussions.”
Mr Neuffer added: “The foreign high-tech industry wants to continue its win-win partnership with the very important China market. But whether through unique standards or onerous regulatory requirements that veer markedly from global approaches, we are feeling less welcome.”