China on collision course with EU and US over bank IT rules

The Chinese government on Sunday began implementing new rules that require commercial banks to buy "secure and controllable" information technology equipment, putting Beijing on a potential collision course with its two largest trading partners.

Business groups and government officials in the EU and US have expressed concern about the regulations, drafted by the China Banking Regulatory Commission and the Ministry of Industry and Information Technology, which will force banks' IT suppliers to conduct research and development in China and also to file source codes with the CBRC.

Under the rules, banks are supposed to submit their implementation plans by March 15 and begin deploying the new equipment by April 1. They have four years, however, to ensure that 75 per cent of their IT products - including equipment such as cash machines and point-of-sales terminals and cash counters - qualify as "secure and controllable".

That has given hope to some foreign banking and technology executives who fear Beijing's real aim is to boost domestic IT suppliers but say the impact could be diluted during negotiations with the EU and US over bilateral investment treaties.

"These guidelines are in their early stages," one bank executive said. "Implementation details are not determined and open to feedback and discussion."

A lawyer who advises multinationals in China added: "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 Organization rules. Historically, Beijing tends to back down when it realises it hasn't fully thought something through."

Other critics say the forced adoption of indigenous IT equipment could jeopardise the stability of banks' computer networks.

The CBRC and MIIT declined to comment on the rules.

This month, Barack Obama, the US president, lashed out at similar provisions in a draft Chinese counter terrorism law that could force all telecommunications and internet companies to provide Beijing with "back doors" to their encryption systems, moving the issue to the top of the two countries' bilateral agenda.

While the rules could take effect as soon as the counter terrorism legislation is passed, they also apply to an industrial sector in China that is dominated by state-owned groups which can already be counted on to comply with government requests.

In a press conference on Sunday to mark the end of China's annual parliamentary session, Premier Li Keqiang sought to downplay any rifts with Washington.

"There are differences between China and the US but what is more important is that both countries hold greater common interests," Mr Li told reporters.

He added that a new Bilateral Investment Treaty that the two countries are pursuing would guarantee equal treatment for companies. "The BIT has already sent a very clear message that the US and China's business ties will get even closer."

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation