Chinas Policy on Banking Tech Suspended

Published By : 17 Apr 2015 | Published By : QYRESEARCH

China recently rocked the American business sector by announcing policies that would mandate American tech giants, one of the most important sectors of the U.S. economy, would have to hand over confidential data such as source codes. This move was met by heavy opposition from a united front of American tech executives and politicians, including a strongly worded warning from President Obama that this would lead to American companies pulling out of China’s economy, hurting the rising Asian giant’s finances.

It seems China has blinked first in the cold war against tech companies, as it has now suspended the policy with respect to banking tech companies. The rules, which would have forced companies that sell hardware and software to Chinese banks to hand in intellectual property, for security purposes, had caused a rift in the trade relations between the U.S. and China. Tech giants such as Apple, Microsoft, IBM had formed trade groups denouncing the Chinese policies as being protectionist.

While the rules have been suspended, the future of American companies in China is still unclear, as the suspension is not a cancellation but a revision. Quite how the Chinese lawmakers manage to rephrase the policy without inviting more ire from the U.S., though, is anybody’s guess. Industry experts are of the opinion that any step in the direction of mandating companies to hand over confidential business secrets is harmful and would be severely opposed.

There is a precedent for China backing down in the area of market freedom, in the case of the 2009 rule requiring all computers imported into China to have the filtering software Green Dam-Youth Escort preinstalled. After heavy international backlash, China suspended the policy and it hasn’t been heard of since, although it was never officially rescinded. The banking policy seems to be on similar grounds, though the consensus is that China will keep using overt or covert means to favor local companies over global ones.
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