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China Wants Foreign Tech Firms Out

The Chinese government announced Monday that it plans to suspend (for now) its proposed policy that would require government-accessible “backdoors” to banking communications as well as place severe restrictions on the use of foreign technology by banks within the country.

This decision to postpone comes in the wake of harsh criticism from numerous tech companies as well as the U.S. Chamber of Commerce, which expressed strong concern that the proposed policy was protectionist and a clear attempt to shut out foreign companies from providing technology to domestic banks.

Jointly issued by the China Banking Regulatory Commission and the Ministry of Industry and Information Technology, the announcement stated that “the guidelines will be revised and perfected, after which they will be reissued for implementation.”

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The current rules, which were intended to go into effect this month, are heavy-handed as well as numerous. They require companies to turn over source code for software, utilize encryption technology almost solely from Chinese vendors, and install a “backdoor” in their systems which allows Chinese authorities to have surveillance access to communications. In addition, many companies would be required to set up R&D centers in China.

The policy seems to be in step with the Chinese government’s ongoing efforts to prop up domestic technology and innovation, mainly by pushing out foreign technology. When implemented, the policy will no doubt hurt several major U.S. businesses. What it will also do is leave a (huge) gap that Chinese companies simply cannot fill, given the extent of their current state of dependency on foreign technology.

Billions are spent on foreign-made servers and mainframes for banks, and Chinese companies are far from able to fill these needs on their own, according to The New York Times. And with an eye on the overall market, IT spending in China is expected to hit US$465 billion this year, a fast-growing market that big players such as IBM, Apple, and Microsoft have a considerable piece of.

Many hope that as part of the revision process, the Chinese government will carry out public consultations and more seriously consider input from those who have the most at stake. As there are no other details as to when the revised policy might be presented, it is anyone’s guess (at best) as to whether or not the government will.

H/T: WSJ

  • Lee Majors

    All foreign tech companies can pretty much consider China a dead end for growth. Sooner or later MS, Apple, and IBM will be shown the door. They might allow the next “big thing” in at a later stage, but that will only be for a few years so they can steal the technology.

    • big in japan

      as crappy as it sounds to say (and to hear), i believe you’re right, six million dollar man.

      • Tang-Shan

        Right.. and the requirement for foreign companies to operate R&D facilities in China, would appear to many as a blatant attempt to access their tech secrets

        • Rayl

          Probably true but tech/IT companies around the world do their share of stealing ideas or repackaging tech under their own brand.

          • Adderall

            Apple shamelessly admits to taking other ideas, making them their own..

          • Race King

            So??.. China shamelessly copies Apple products, selling crappy fakes under the Apple BRAND

          • JoeyB

            This probably does Apple good in the long run with all the rabid Apple fans in China. People buy a fake that breaks, desperate to get the real thing even more