European business group protests against cybersecurity rules that ‘penalise’ foreign firms in China
Chamber of commerce joins other overseas business associations on the mainland in signing letter calling for draft rules governing the insurance sector to be extensively revised
The European Union Chamber of Commerce in China has joined other overseas business associations in signing an open letter calling for changes to Chinese regulations overseeing the insurance industry, which they say unfairly penalise foreign firms.
The move comes ahead of ministerial-level talks next week in Beijing during the eighth China-US Strategic and Economic Dialogue, in which trade and business issues are likely to be high on the agenda.
The government says the draft measures are to improve cybersecurity and include stipulations that insurance firms should store data within China and prioritise buying “secure and controllable” products, including Chinese encryption technologies, hardware and software.
Foreign business groups says the measures are excessive and will make it harder for overseas firms to compete with Chinese insurance companies and technology providers on the mainland.
The letter comes amid rising discontent among foreign companies operating in China over the hurdles they face in doing business, including restricted market access, unclear regulations and government controls over the internet.
China, like other WTO members, has the right to implement measures necessary for the maintenance of cybersecurity, but we believe that the provisions go far beyond what is necessary
Twenty-nine industrial associations and business chambers, covering the United States, the European Union, Japan and Canada, have signed the letter.
It is addressed to the China Insurance Regulatory Commission and the Ministry of Commerce and in a copy seen by the South China Morning Post foreign business councils and associations ask regulators to postpone the adoption of the regulations to allow time for “substantial revision”.
James Zimmerman, the chairman of American Chamber of Commerce in China, said in a statement that hoped next week’s talks would address some of the problems faced by foreign businesses.
“We hope that the talks will emphasise the benefits to China’s economy of increasing fairness and transparency, rather than retreating into a protectionist stance in response to the economic slowdown,” he said.
“We hope China will appreciate the value of fostering a dynamic, open investment environment, with China feeding its economy with foreign investment and know-how, rather than starving it,” he added, urging the government to offer “fundamental openings to the market”.
Joerg Wuttke, the president of the EU chamber in China, said in an email that he had signed the letter urging the postponement of the regulations on the insurance industry.
The letter lists six concerns about the regulations, including the local storage of data and the requirements for transferring data overseas.
“China, like other WTO members, has the right to implement measures necessary for the maintenance of cybersecurity, but we believe that the provisions go far beyond what is necessary,” the letter said.
“If adopted as currently drafted, however, the provisions would create unnecessary obstacles to international trade and are likely to constitute a means of arbitrary or unjustifiable discrimination against producers and service providers,” it said.
The regulations may also adversely affect accounting, advertising and law firms, as well as insurance companies, the letter said.
Jacob Parker, the vice president of US-China Business Council on the mainland, said the rules would require big financial firms to adopt local technologies and “putting barriers on foreign technology will undermine China’s goal of a safer and more secure system”.
“We and our members continued to be concerned that China is using national security for protectionist purposes,” Parker said.
China passed national security and counterterrorism legislation last year, with requirements for firms to take action to improve cybersecurity.
Concerns about the problems faced by foreign businesses and investors on the mainland may cloud the outlook for negotiations between China and the US and with the EU to agree investment pacts, according to analysts.
Chinese economists believe the pacts are key for China to knit a global network to expand its trade and investment.
The issue may also affect overseas attitudes towards Chinese firms’ expansion overseas. Brussels and Berlin have recently voiced opposition to the acquisition of German robot giant Kuka by China’s Midea group, preferring control to remain within Europe.
The meetings between senior US and Chinese officials next week in Beijing will be the final time the Strategic Economic Dialogue talks will be held during President Barack Obama’s term in office.
Lu Zhengwei, chief economist at Industrial Bank, said it was unlikely any breakthrough would be made on an investment pact.
“At the most, the two sides may use words such as speeding up the process. {A pact is also] unlikely to get support from the US congress, which is controlled by the Republicans, but China may agree to control steel exports in exchange for US agreement to launch yuan transaction business in its market,” he said.
