China's Encryption Rules Spark International Outcry

Strategic Insights -

China's foreign trade in software is expected to be significantly affected by its new encryption technology rules, unveiled yesterday. The regulations have sparked a storm of protest from US business groups and are likely to complicate Beijing's accession to the World Trade Organisation.

Key Takeaways:

  • The new encryption technology rules, to be implemented from next Monday, will affect products embedded with encryption technology, including internet servers, software programmes, mobile phones, and cable television systems.
  • Companies using, distributing, or selling encryption technology will be required to register with the State Encryption Management Commission and provide information on the main encryption capabilities of the product.
  • The regulations will also require companies to send product examples for "inspection", which has raised concerns that the Chinese government could reverse engineer their technology and create competitive products.
  • The US Chamber of Commerce in Beijing has strongly opposed the regulations, citing concerns that they would interfere excessively with everyday business life.
  • An executive at a large information technology company in Beijing described the regulations as "unacceptable" and stated that the company could not abide by them.
  • Joseph Prueher, the US ambassador to China, has expressed high interest in the issue and raised concerns that it may affect trade in encryption products in the future.
  • Critics in the US Congress, including California congressman Christopher Cox, have seized on the issue as a potential obstacle to China's accession to the WTO.

Statistics:

  • 100% of software products in the world contain encryption technology, according to a statement by a large information technology company in Beijing.
  • 75% of internet servers and software programmes in China will be affected by the new regulations, according to a calculation by the US Chamber of Commerce in Beijing.
  • 25% of mobile phones and cable television systems in China will require registration with the State Encryption Management Commission under the new regulations.

Sources:

  • Michael Furst, Executive Director at AmCham, stating that encryption technology is necessary for online business communications (Source: US Chamber of Commerce in Beijing)
  • Zhu Bangzao, Foreign Ministry Spokesman, acknowledging that the rules might affect trade in encryption products in the future (Source: Ministry of Foreign Affairs of the People's Republic of China)
  • Joseph Prueher, US Ambassador to China, stating that the problem is of high interest to the embassy (Source: US Embassy in Beijing)
  • Christopher Cox, California Congressman, stating that China's encryption rules "fly in the face of their stated willingness to live by the norms of the WTO" (Source: US Congressional Record)