China Cites Security In Crackdown On Western Tech: Is it Protectionism or Prudence?

U.S. Trade Representative Michael Froman slammed new cybersecurity regulations by China that threaten to cut American technology companies out of the country’s $20 billion banking market, calling the measures “protectionism.” But some observers say Beijing has good reason to institute the rules, as well as other tough new security measures it’s mulling, in the wake of the National Security Agency spying revelations made by Edward Snowden in 2013.

The regulations Froman called out Friday would require foreign tech companies to essentially submit their intellectual property for examination by Beijing before selling it to Chinese banks. These regulations, which have been called intrusive by several experts, are set to take effect April 1, but Froman and others are hoping to prevent that.

The regulations “are not about security -- they are about protectionism and favoring Chinese companies,” Reuters quoted Froman as saying. “The administration is aggressively working to have China walk back from these troubling regulations.” Froman’s office did not immediately respond to a request for elaboration.

The banking regulations are not the only ones China has introduced or is looking at introducing that could potentially hurt American hardware makers such as IBM, the Hewlett-Packard Co. and Cisco Systems Inc. China also recently banned government procurement of numerous foreign brands, and the country is considering counterterrorism laws that would require companies to give its government backdoor access to their technologies.

The situation is a turnabout of sorts. For years, U.S. companies were barred from exporting a wide range of computer components to China, including chips containing consumer-grade security technologies that could be found in off-the-shelf retail personal computers.

“The irony in this latest argument between the U.S. and China is that China is attempting to ‘hack’ international trade policy with cybersecurity laws,” said Jonathan Sander, strategy and research officer at Stealthbits Technologies Inc., a provider of data-security solutions. “China using every avenue it can to gain the upper hand is par for the course. The West sees using something like cybersecurity as a platform to negotiate trade as dirty pool.”

But others indicated China’s concerns about cybersecurity are not unfounded. This year, hackers stole $1 billion from banks around the globe, and since the American NSA leaker Snowden came forward, a mountain of American cyberespionage programs have been disclosed. Most recently came news that an organization, most likely the NSA, may have implanted spyware on hard drives sold around the world.

“From the information-technology security perspective, this is China reacting to the news that the U.S. government has effectively owned their networks until now,” said Stu Sjouwerman, CEO of KnowBe4, a cybersecurity firm. “The U.S. government has caused this, and the U.S. technology community is suffering for it.”

China’s new regulations are far-reaching, but they’re also on par with laws and regulations being instituted by other countries around the world, said Chris DeAngelis, the China general manager of Alliance Development Group, a firm that specializes in helping American businesses break into the Chinese market. DeAngelis pointed out that in the U.K., Prime Minister David Cameron has said he would ban messaging apps that do not give his government a backdoor to monitor for terrorist threats. China has its own terrorism threats to deal with, including a recent outbreak of attacks linked to Uighur rebels in the northwestern region of Xinjiang.

“Are they protecting their own companies? Maybe, but I don’t think any more so than any other country would,” DeAngelis said. “I don’t see this as something that’s significantly more troublesome than what everyone else is doing.” China may be trying to give domestic companies such as Huawei Technology Co. Ltd., Lenovo Group Ltd. and Xiaomi Inc. an edge, but -- in a world of billion-dollar cyberthefts, widespread digital espionage and terrorist attacks -- it may prove difficult for the U.S. to talk China down.