BANKING AND FINANCE

China ‘suspends until further notice’ bank technology restrictions opposed by the US

Overseas firms feared the rules would force them to hand over encryption keys and other sensitive details of how their systems work if they are operating in China

PUBLISHED : Friday, 17 April, 2015, 4:46pm
UPDATED : Friday, 17 April, 2015, 4:46pm

China has put on hold bank-technology rules that Washington and others complained amount to unfair regulatory pressure on foreign firms, according to a government notice.

The document, dated on Monday and issued by China’s bank and tech industry regulators, said the rules to improve the security of banking technology were suspended until further notice while the government solicits feedback from banks.

The rules sparked concern among foreign business groups and governments after they were issued in December.

Their suspension comes as US Secretary of Commerce Penny Pritzker visits China on a high-profile trade mission to drum up business for American firms.

“I think the government concern is reasonable, but it’s technically impossible to comply with such rules,” said a banker working at a foreign bank in China who declined to be identified.

The decision to suspend the rules came after “financial institutions in the banking industry and related parties put forward opinions for improvements and proposed changes”, the notice said.

The China Banking Regulatory Commission and Ministry of Industry and Information Technology declined to provide immediate comment.

China agreed to delay implementing the banking technology restrictions last month.

The government is also working on a broader anti-terrorism law that would require foreign companies to hand over encryption keys, triggering US protests.

The new policies represent one of China’s most significant steps toward limiting foreign technology, 18 months after former National Security Agency contractor Edward Snowden disclosed that US spy agencies planted code in American tech exports to snoop on overseas targets.

The Obama administration has raised concerns about the bank rules and other cyber-security regulations that could limit foreign technology companies’ opportunities in China.

A group of 31 business associations from the United States, Japan and Europe told Chinese officials in a letter that they had strong concerns about bank information technology rules and urged Beijing to formally suspend them.

Business groups fear that the regulations would favour domestic products at the expense of overseas firms, or require that companies disclose to the government sensitive intellectual property, encryption keys or install “backdoors” in products.

Washington has said it is working with allies in Europe and Japan to break down the Chinese barriers and had requested through the World Trade Organisation that Beijing clarify the banking technology rules.