BEIJING: China has agreed to delay implementing new bank technology restrictions that Washington has complained represent unfair regulatory pressure on foreign firms, a senior US Treasury official said in Beijing on Monday.

China said this month work was ongoing on a draft anti-terrorism law that would require foreign companies to hand over encryption keys and otherwise facilitate Beijing’s ability to bypass security measures, triggering US protests. It followed an earlier set of draft financial sector regulations that pushes China’s state-owned banks to buy technology from domestic vendors.

China was now “suspending” the regulations that applied to the banks, according to the official, speaking after meetings in Beijing between US Treasury Secretary Jack Lew and senior Chinese officials, including Premier Li Keqiang.

There was no immediate comment from China.

Lew earlier said he would discuss the issue with the Chinese government.

“We made clear that suspending them is the right approach,” Lew told reporters. “I think the need for a process to resolve this is necessary because even as they’re pending it causes a difficult environment for American businesses trying to do business in China.” The policy, while applied to both domestic and foreign firms, is seen largely benefiting domestic players, and foreign software firms in particular risk sacrificing sales in other markets if it becomes known that they have given Beijing back door access to their code.

Another regulation from China restricts the kinds of computers purchased by the Chinese banking industry to ensure that they meet “security and controllability” requirements, seen as a way of effectively forcing Chinese banks to buy “indigenous” software applications.

The US has complained of industrial espionage by Chinese firms against its companies, saying it is often backed by government agencies including the Chinese military. Beijing denies the allegations.—Reuters

Published in Dawn, March 31st, 2015

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