Global business associations urge China to drop foreign tech 'black-list' for bank IT procurement

PUBLISHED : Tuesday, 14 April, 2015, 10:15am
UPDATED : Monday, 20 April, 2015, 12:08pm

Business associations from Europe, the US and Japan have urged Chinese officials to formally suspend new rules forcing state-owned banks to buy technology from domestic vendors.

In a joint letter, 31 trade associations said that they had "strong concerns" about the new rules, which the US trade office has said could breach China's international trade commitments.

The groups, including the US Chamber of Commerce, the European Services Forum and the Japan Chamber of Commerce and Industry, said the rules and other policies discriminate against foreign providers of internet and information and communications technology (ICT) products, solutions and services.

Beijing announced in February that it was removing, among others, Cisco Systems and Apple from official state procurement lists.

Experts said the move was motivated by surveillance fears in the wake of security contractor Edward Snowden's revelations about US National Security Agency spying.

"The Snowden incident, it's become a real concern, especially for top leaders," said Tu Xinquan, associate director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing.

"In some sense the American government has some responsibility for that. [China's] concerns have some legitimacy."

A senior US Treasury official said on March 30 China had agreed to suspend implementation of the "buy domestic" rules, but the groups - which include organisations representing companies like Cisco, Apple, IBM, Microsoft, and Google - said banks were continuing to implement them.

"We therefore urge the Chinese leadership to officially suspend implementation of the guidelines through a written public notice, publicise them as a proposal, and initiate a formal public consultation consistent with China’s international obligations," said the letter, to the Chinese Communist Party Central Leading Group for Cyberspace Affairs.

The associations said they were also concerned about similar initiatives in the telecommunications sector and about a broad review of cyber security, asking that companies and foreign governments be consulted.

While US officials have warned that the rules may violate World Trade Organisation (WTO) regulations, experts said that bringing a challenge would be difficult since Beijing did not sign up to a plurilateral treaty on government procurements when China joined the WTO in December 2001.

"Unfortunately, direct options for recourse by trading partners through multilateral venues are limited, largely because China has failed to accede to the Government Procurement Agreement (GPA), despite a commitment to do so after the country joined the WTO in 2001," said Stephen Ezell, a senior analyst at US-based think tank the Information Technology and Innovation Foundation.