Proposed legislation in China–under the guise of counter terrorism–has US analysts on edge about potential protectionism or infringement on trade secrets of US tech firms. The proposed legislation is the latest development in the Chinese government’s attempts to regulate high tech companies, after regulators have enacted rules that will require firms that provide banking technology to “submit to invasive audits and create backdoors in hardware and software.” US firms have complained of overwhelming regulatory pressure from the Chinese government, including the new rules and increasing antitrust investigations. The new legislation however would require far more of telecommunications and internet service providers—and some groups fear the law’s scope would be much broader—to provide the Chinese government with encryption codes, aid in decryption when asked for, as well as additional backdoors into both hardware and software. There appears to be the possibility that the legislation would use heavy fines or even potential imprisonment for officials of firms who do not comply with the requirements or requests from Chinese law enforcement. Many groups have argued that the regulations and rules have been put in place to provide protection for Chinese firms who risk competition in one of the largest markets that American firms have been expanding into. Still others fear that the rules, which may require firms to turn over “proprietary technology,” are overly intrusive on the dealings of US companies. Firms hoping to expand in Chinese markets are faced with the dilemma of keeping on the good side of the Chinese government, while also remaining in compliance with US laws and maintaining consumer confidence. The United States has also lost some moral high ground in being able to diplomatically resolve fears after revelations from Mr. Snowden, and recent reports from Russian security firms about the extent of US surveillance. Still US officials have publicly stated they have voiced concerns to China over the proposed legislation.


William Healy

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