EU tech firms are heaving several huge sighs of relief, as China lifts a ban on foreign tech in banking, although it may only be a stay of execution.
Beijing officials notified authorities on Thursday that they would “suspend the implementation” of a controversial new law that effectively blocks any non-Chinese tech company selling software to local banks.
Last December the Chinese government published guidelines for the “Application of Secure and Controllable Information Technology in the Banking Industry”, which in practice excludes foreign IT companies from most of the Chinese banking IT market, estimated to be worth €18bn by 2017.
In order to qualify as "secure and controllable", software must undergo intrusive security testing by Chinese authorities, make use of indigenous Chinese intellectual property, and be engineered to restrict the flow of cross-border data.
Foreign technology vendors would also have to set up R&D operations in China.
The guidelines came into force on 1 April.
“While in principle these measures are intended to enhance cyber-security, in practice they will not only undermine the ability of European companies to participate in the IT market in China, they will also hurt the development and integration of Chinese banking sector in the global market,” said DigitalEurope, a European organisation representing the digital technology industry.
“Banks in China should have the same wide choice of technologies — including cybers-ecurity systems — that banks in the rest of the world have,” added DigitalEurope director general John Higgins.
However, Chinese regulators have not dropped the rules altogether: once they have been overhauled with input from the financial sector and “other stakeholders” they will be reintroduced.
European and US vendors fear that the law is part of a wider move by Beijing to favour home-grown technology. Companies do not want to be locked out of the overall ICT market in China as it's thought to be worth around a colossal €411 billion.
In a tit-for-tat with the US, which banned Chinese firm Huawei from government contracts, some major American tech companies, including Apple and Cisco, are already banned from use by the Chinese state. ®