U.S. Questions Banking Technology Restrictions

In a World Trade Organization filing published on Thursday, the United States questioned Beijing’s new banking technology rules limiting the sale of foreign information technology to Chinese banks, arguing that the restrictions discriminate against foreign competitors. The filing came after China dropped a number of leading foreign technology firms from its list of approved state procurement vendors earlier this year. Tom Miles at Reuters reports:

By bringing up the issue at the , where member countries can legally challenge foreign laws that affect trade, the United States has put pressure on China to explain how the regulations – which aim to promote “secure and controllable” banking – comply with global trade rules.

“Could China explain what ‘controllable’ means?,” the U.S. filing asked. “Do the guidelines apply to foreign-owned banks operating in China?”

Although it did not question China’s right to improve cybersecurity, it said the definition of “secure and controllable” would severely limit access to the commercial banking sector for many foreign products and services and dictate the business decisions of financial institutions.

That raised the question of compliance with WTO rules, which bar countries from favoring domestic producers over competitors abroad, the United States said. [Source]

Also recently, a draft counterterrorism law originally expected to pass at the recent National People’s Congress was put on hold after attracting criticism from activists for its human rights implications and from foreign diplomats for requirements that tech firms comply with new government demands. A post from The Diplomat fits the controversial tech demands of the law into China’s greater technology and cyber strategies:

Recent reports by U.S. authorities that the law has been put on hold for good have turned out to be premature. The law will likely be somewhat revised to address some Western concerns, since Beijing is still technologically dependent on foreign companies, despite a push to eliminate foreign technology in key sectors by 2020. “Currently, the deliberation on this law is ongoing,” Foreign Ministry spokesman Hong Lei said on March 16.

What to make of this development? In short, China is trying to accomplish two things. First, the law fits into Xi Jinping’s broader plans to clear banks, the military, state-owned enterprises and key government agencies from its dependency on foreign technology (e.g., Microsoft’s Windows operating system and core servers) by 2020. The already existing trend in Beijing towards technological nationalism was merely amplified by the NSA spying revelations.

[…] Since China still has to rely on foreign technology in the immediate future, the law, which the Chinese leadership knew would stir controversy, might have been intended as a “shot across the bow.” In other words, China wanted to tell the United States government not to overplay its hands in cyberspace and engage in what Beijing called “reckless behavior” in the critical months ahead (both countries are currently negotiating a bilateral investment treaty).

[…] The over-the-top draft counter-terrorism law is an insurance card for Beijing. For one, it will ensure that the United States will abstain from publicly exposing yet another Chinese cyberespionage ring. Since almost all the major American IT companies are active in China (with a few notable exceptions), Beijing can dangle the law over the U.S. private sector’s head to encourage cooperation. [Source]

Read more about cyberespionage and technology regulations, via CDT.