China should change its tune on new rules for purchases from American high-tech companies if it wants to do business with the United States, President Obama recently warned in an exclusive interview with Reuters.
China reportedly is planning to ask U.S. high-tech firms to hand over their encryption keys and install security backdoors in their systems to allow surveillance as a counterterrorism measure.
It also will require high-tech companies to keep servers and user data within China’s borders, supply law enforcement authorities with communications records, and censor terrorism-related Internet content.
A Chinese parliamentary body read the second draft of the proposed law last week. China is expected to adopt the legislation soon.
Surveillance Is Not OK
The measures would require foreign companies to turn over mechanisms that would let the Chinese authorities keep track of all users of their services, Obama said. This could hurt the Chinese economy over the long run.
The President should know: Reaction to disclosures by whistle-blower Edward Snowden about the U.S. National Security Agency’s surveillance activities led many of America’s allies to look for other sources of high-tech equipment.
“If we were in school, China would be in trouble for plagiarism,” remarked Daniel Castro, vice president at the Information Technology and Innovation Foundation.
China “is currently being a bit more overt [than the U.S.], but since Snowden’s revelations, it’s virtually impossible for the U.S. to take the high road here,” said Rob Enderle, principal analyst at the Enderle Group.
“President Obama should look at the clandestine efforts of the NSA and CIA and the now-relevant disclosures about the Equation Group, especially related to offensive cyberoperations against nation-states such as China, Iran, North Korea and Russia,” suggested Chinese cyberwarfare expert Bill Hagestad of Red Dragon Rising.
In its response to the U.S. warning, China’s Foreign Ministry said it has taken into account lessons learned by other countries and pointed out that every country is taking measures to protect its information.
The formulation of the law is China’s internal affair, the ministry added.
“This is the planned response for antiterrorism legislation to protect Communist China against the seething uprisings by Islamic Jihadists in restive Xinjiang,” Hagestad told TechNewsWorld.
The Uyghur population of China’s Xinjiang province, who are Muslims, have launched several terrorist attacks in recent years, the latest being last November.
“China’s demand is not that different from what the U.S. government and others have asked for,” ITIF’s Castro told TechNewsWorld. “Arguably, [it] is more comprehensive — although ironically more transparent — than anything in the United States.”
Possible Blowback for a Hardline Stance
China “is likely to go forward with its policy regardless of what the U.S. government wants,” predicted Castro, because its market “is too important to too many U.S. companies to simply cede over this demand.”
Also, American consumers depend heavily on inexpensive China-made products to help fight inflation, and U.S. companies use low-cost Chinese labor to turn out products at competitive prices, so a trade war is probably not in the cards.
The economic impact of such a war “would likely be catastrophic, and I doubt the administration will risk this,” Enderle told TechNewsWorld.
Catastrophic? For the U.S.? Yes.
“China no longer needs the United States and its precompromised technological products,” Hagestad maintained. It “is already working with other countries, such as France. Apple, Intel and other U.S. companies have been officially removed from Chinese government procurement lists.”
The Chinese don’t trust the U.S., given the apparent cyberespionage the NSA has conducted against Chinese companies, such as Huawei, according to Hagestad.
It’s not just U.S. high-tech firms that are in hot water; other industries — such as pharmaceuticals and automotive — are taking a beating from the Chinese government, Hagestad said.
Once access to the Chinese market is lost, he warned, “it cannot be recovered — ever.”