China has now passed new legislation under the name “The Cyber Security Law” which would grant Beijing unprecedented access to the foreign technology of companies seeking to do business within the world’s second largest economy. The new law was passed by China’s national legislature and will take effect starting in June of 2017 according to government officials.
Among many other things, the law will require Internet operators to cooperate with any investigations involving crime or national security. It also imposes mandatory testing and certification of all computer equipment, which necessitates each company granting the Chinese government’s investigators full access to their data if any wrongdoing is suspected (or alleged).
Logically, foreign companies are concerned that these policies give Chinese companies a major advantage over international competitors. “This is a step backwards for innovation in China that won’t do much to improve security,” according to James Zimmerman, Chairman of The American Chamber of Commerce in China. “The Chinese government is right in wanting to ensure the security of digital systems and information here, but this law doesn’t achieve that. What it does do is create barriers to trade and innovation” he told reporters via email.
The move has now caused more than 40 business groups from the U.S., Europe and Japan to send a letter to Chinese Premier Li Keqiang, arguing it will prevent foreign entry of outside companies and slow China’s growth over time. The measure is seen by many as part of a huge wave of regulations under President Xi Jinping to gain control over all aspects of the Internet in China.
For his part, Zhao Zeliang, director-general of the bureau of cybersecurity for the Cyberspace Administration of China said: “The law fits international trade protocol and its purpose is to safeguard national security. China’s cybersecurity requirements are not being used as a trade barrier.”
All of this is happening as President-Elect Trump prepares to take office after a campaign that included the threat of labeling China a currency manipulator and promises of tariffs to remedy a trade imbalance may foreshadow a strained financial relationship between two superpowers with data security and infrastructure technology at the epicenter. Will compromises be made or will tech trade become more insular in each nation? Only time will tell.