US prez Barack Obama has criticised China's new tech rules, urging the country to reverse the policy if it wants a business-as-usual situation with the US to continue.
As previously reported, proposed new regulations from the Chinese government would require technology firms to create backdoors and provide source code to the Chinese government before technology sales within China would be authorised.
China is also asking that tech companies adopt Chinese encryption algorithms and disclose elements of their intellectual property.
The new requirements, laid out in a 22-page document approved late last year, are supposedly geared towards strengthening the cyber security of critical Chinese industries and guarding against terrorism.
In an interview with Reuters, Obama said Beijing's far-reaching counter-terrorism law would require technology firms to hand over encryption keys as well as installing "backdoors" into systems, thus granting Chinese authorities access in the process.
"We have made it very clear that this is something they are going to have to change if they are to do business with the United States," Obama said. "This is something that I’ve raised directly with President Xi."
The proposed laws "would essentially force all foreign companies, including US companies, to turn over to the Chinese government mechanisms where they can snoop and keep track of all the users of those services," Obama added.
"As you might imagine, tech companies are not going to be willing to do that," he said.
Aside from user privacy concerns, Western business groups such as the US Chamber of Commerce have criticised China's policies as protectionist. The proposed rules extend the scope of recently adopted financial industry regulations that effectively encouraged Chinese banks to buy from domestic technology vendors.
The Chinese government is pushing these anti-terrorism rules as vital in protecting state and business secrets.
The disagreement marks another cyber security and technology policy difference between US and China, with relations not yet healed from ongoing complaints about Chinese cyber espionage and the Snowden revelations.
The Snowden revelations have effectively prevented the US from taking the moral high ground on internet security and technology policy issues. For example, Chinese Foreign Ministry Spokesperson Hua Chunying referred to the Gemalto hack in a press conference where she was asked about Obama's criticism of China proposed laws.
The legislation is China's domestic affair, and we hope the US side can take a right, sober and objective view towards it.
On the information security issue, there are media revelations that a certain country embedded spying software in the computer system of other country's SIM card maker for surveillance activities.
This is only one out of the recently disclosed cases. All countries are paying close attention to this and taking measures to safeguard their own information security
The Chinese counter-terrorism provisions apply to both domestic and foreign technology suppliers. However, US officials argue that the proposed law should be viewed in the context of new banking rules and anti-trust investigations as a raft of measures that make it difficult for foreign technology suppliers to sell into the world's second biggest economy.
Obama told Reuters: "Those kinds of restrictive practices I think would ironically hurt the Chinese economy over the long term because I don’t think there is any US or European firm, any international firm, that could credibly get away with that wholesale turning over of data, personal data, over to a government."
Groups like the ACLU are, of course, fiercely opposed to government-mandated backdoors. The failed Clipper Chip key escrow scheme of the 90s even provides a well-known historical precedent.
Such key-escrow schemes introduce a weakness that unintended parties (third party intel agencies, criminal hackers etc.) could exploit, technologies and privacy activists argue. ®