China clamps down on banking security

The Chinese government is pressuring the country’s banks to buy what it calls “secure and controllable” IT equipment – but will it push foreign companies out?

European and American business groups and government officials have expressed concern that the new rules will drive a wedge between China its two largest trading partners. The regulations, drafted by the China Banking Regulatory Commission and the Ministry of Industry and Information technology will force Chinese banks’ IT suppliers to conduct R&D inside the country and file source codes with the CRBC.

But while banks are supposed to submit their plans for the implementation of the new rules by March, they have four years to ensure that 75% of their IT products meet the “secure and controllable” criteria. This includes cash machines, point-of-sale terminals and cash counters.

This has given hope to technology executives who feared that Beijing’s security moves are part of an attempt to boost domestic IT suppliers at the expense of foreign companies. Many also feared that security would be compromised by a focus on local products.

But the impact of these rule changes also be reduced during negotiations with the EU and US over bilateral investment treaties, the FT reported, since the new guidelines are still open to change.

“It could be a broader way to push foreign companies out but I don’t think they’d go in that direction because they know they will run into World Trade Organisation rules,” a lawyer who advises multinationals in China told the paper. “Historically, Beijing tends to back down when it realises it hasn’t fully thought something through.”