AH Tech Talk: Is China Enforcing New Laws On Foreign Tech Firms, Security or Trade Barriers?

Next month China plans to implement new laws regarding all foreign technology firms who wish to do business in their country. While an official declaration from Beijing symbolized their wishes to allow a free market and economy, newly announced regulations would say otherwise. These mandate that foreign companies must submit source code for their products in their entirety to the Chinese Government as well as undergo regular audits. Furthermore, businesses selling in the Chinese market must include open back doors for the Chinese government to have ability to gain full access to products.

Deputy U.S. Trade Representative Robert Holleyman of the Obama Administration publicly denounced the proposed regulations from China as blatant trade barriers to the market. High level officials in trade and the cabinet have reached out to Chinese counterparts in hopes of getting the regulations placed on hold. China Foreign Ministry spokeswoman Hua Chunying commented on the concerns stating that as long as companies respected their local laws there would be no further restrictions. The fact that companies must allow back doors into their products for the Chinese government is at least understandable from a security perspective. The complete submission of all source code on the other hand raises concerns of security for foreign countries, especially the U.S. with several cyber security concerns involving the mentioned country. Possessing the source code for foreign products and services raises ethics concerns, the security implications for the U.S. could prove costly.

Some business, desperate to dip into the massive Chinese market have already subdued to the Chinese governments’ requests, most notably Apple. With Apple’s recent ventures into the Chinese market they posted record profits of $18 billion last month. While many foreign businesses and the U.S. Chamber of Commerce object to these rules completely, other businesses will likely deal with the requirements in an attempt to capture the market. There is a possibility that concerns taken up with the World Trade Organization could illicit an official response or change to the proposed regulations. The World Trade Organization is in place to protect corporations specifically against things such as tariffs and other trade barriers. While the World Trade Organization is not perfect in all its policies, hopefully some compromise can be met to ease the burden on companies looking towards China to increase profits.

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