China’s New Cyber Rules Worry Foreign Businesses

A cyber security law that could be passed this year in China contains provisions for invasive government security reviews and onerous requirements to keep data in the country. The proposed cyber security law and separate rules for insurance companies would require technology providers to give authorities access to how their products work and to store information about Chinese citizens within China.

More than 40 global business groups signed a petition to Premier Li Keqiang, the country’s top economic official, urging China to revise the rules. The groups say the regulations would impede China’s economic growth and obstruct market entry. Under WTO rules, the new laws could also count as trade barriers.

The groups say the pending rules are vague and discriminate against foreign enterprises. Complaints are mounting that Beijing is trying to squeeze foreign competitors out of promising industries. The requirements to hand over sensitive data or source code to the government could put business secrets at risk. Within the past two years Apple Inc. was asked by Chinese authorities to hand over its source code but refused.

The letter represents the biggest such joint action since at least 2010. That year, the U.S. Chamber of Commerce, the Business Software Alliance, and organizations representing insurers and manufacturers from Britain, Japan, Australia and Mexico banded together to express concern over China’s actions on rare earths exports. A similar outcry from business groups was prompted by restrictions on the use of security technology in an earlier Chinese anti-terrorism law and rules for banks.

China’s Foreign Ministry said that the pending cyber security law will not create obstacles for foreign business. The ministry said, “The concerns of foreign investors and businesses invested in China are unnecessary.” The ministry claims that companies would have the ability to transfer data required for business purposes outside of China’s borders after passing a security evaluation. The ministry said, “These evaluations are for supervising and guaranteeing that the security of this data accords with China’s security standards.”

China’s State Council recently called on local authorities to increase their efforts to implement policies to maintain the stability of the country’s foreign trade. China began implementing the policies in 2013 to encourage growth in foreign trade. The council issued statement saying that, the trade facilitation measures initially adopted in the country’s free trade zones should also now be implemented in other regions. The council also said that financial institutions should provide credit support for companies that are exporting goods, as well as help them deal with exchange rate risks.