The U.S. ramped up pressure on China over proposed rules for technology in the Chinese banking industry that have become the latest flash point over cyber-security between Washington and Beijing.
U.S. Trade Representative Michael Froman criticized the regulations Friday as favoring Chinese companies over foreign technology firms and said they would violate China’s trade commitments. The rules call for Chinese banks to sharply increase their use of secure technology, but U.S. and European business groups have said the rules are intrusive and require turning over proprietary information to Chinese authorities.
“China’s new regulations on the use of information and communications technology in the banking industry go directly against a series of China’s bilateral and multilateral trade commitments,” Mr. Froman said in a statement. “For example, the rules would require technology transfer and use of domestic Chinese intellectual property as a precondition for market access—both of which China has committed not to do.”
“The rules aren’t about security. They are about protectionism and favoring Chinese companies,” he said. “The administration is aggressively working to have China walk back from these troubling regulations.”
Officials at the China Banking Regulatory Commission didn’t respond to a request for comment. Earlier this month, the commission said it would take different opinions into consideration before implementing the rules.U.S. officials previously sent a letter to their Chinese counterparts expressing concern over China’s proposed technology rules, according to a U.S. official. The letter was signed by Mr. Froman, U.S. Secretary of State John Kerry, U.S. Commerce Secretary Penny Pritzker and U.S. Treasury Secretary Jacob Lew , the official said.
The Chinese banking rules have become part of broader worries about cyber-security that industry experts say have hit companies ranging from Cisco Systems Inc. to International Business Machines Corp. They follow disclosures by former U.S. National Security Agency contractor Edward Snowden that U.S. intelligence officials have used U.S.-made gear for surveillance activities. China in response has pushed to develop domestic alternatives in areas ranging from servers to semiconductors.
Foreign companies worry they could lose out on the vast market. In a letter this week to the European Commission asking for help in delaying China’s proposed rules, European business groups valued China’s banking-technology market at €18 billion ($20 billion) by 2017.
U.S. and European business groups say the rules require them to turn over source code, encryption keys and other sensitive technology. They say it will also require them to use Chinese technology.
The rules listed on the Chinese banking commission’s website call for the country’s lenders to switch to what it terms as safe-and-controllable technologies. The commission called for about three-quarters of banks’ infrastructure to meet that criteria by 2019 from less than 15% currently.