China's stress on security is holding back innovation, says German ambassador

German ambassador urges balance between China's security needs and business interests, as foreign firms are limited by slow internet speeds

PUBLISHED : Saturday, 23 May, 2015, 1:24am
UPDATED : Saturday, 23 May, 2015, 1:24am

China's push for innovation could be hampered as Beijing embraces more stringent national security requirements that risk undermining companies' operations as well as the movement of data online, German ambassador to China, Michael Clauss, says.

In an interview with the South China Morning Post, Clauss said concerns about the difficult operating environment for foreign companies on the mainland had deepened.

He called on China to strike a balance between the country's national security needs and its foreign business interests.

"If you overdo cybersecurity, it may kill innovation or at least hamper it, thus jeopardising economic growth," Clauss said.

The ambassador's remarks came amid repeated calls by Premier Li Keqiang to cut government red tape to nurture entrepreneurship and innovation, and as the State Council released a plan earlier this week, vowing to revamp its manufacturing sector to put it on equal footing with industrialised nations within a decade.

Cooperation with foreign companies will be boosted to improve manufacturing standards on the mainland, but security vetting for certain industries will be stepped up.

Clauss said it was appropriate for the government to streamline bureaucracy, but it had also put more obstacles in the way of foreign investment.

European companies were concerned about a draft law by the Ministry of Commerce that would lead to tougher scrutiny of foreign investment on the grounds of protecting national security, the ambassador said.

"The notion of national security in China is very wide," Clauss said. "This applies not just to new but to all existing investments in China. It creates a lot of legal uncertainty."

Discussion of the draft law is ongoing, but Clauss said it was "doubtful" whether the concerns of foreign companies would be addressed.

"[The draft law] takes away some obstacles but puts in place new obstacles," he said. "Our feeling is that security is clearly being overemphasised."

A survey by the European Union Chamber of Commerce revealed that internet speed had negatively affected 86 per cent of 470 member companies in the chamber's Beijing operation, and 70 per cent said the internet environment in the city had deteriorated.

Internet speed in Beijing averaged 4.17 megabits per second, ranking second on the mainland after Shanghai, but far behind other world-leading cities, such as London, New York and Seoul, which had a speed of 23.6Mbps, the report said.

Fast internet was crucial for communications and cross-border data transfer, Clauss said.

"The existing firewall around China is an obstacle for effective production operations," he said.

"According to many companies operating in China, [internet censorship] has gone from bad to worse."