​China sets new regulations for foreign tech companies

The Chinese government has introduced new rules that require foreign tech companies to turn over source code, submit to audits, and build back doors into hardware and software.
Written by Aimee Chanthadavong, Contributor and  Leon Spencer, Contributor

The Chinese government has introduced new regulations for foreign technology companies that sell computer equipment to Chinese banks.

According to The New York Times, the new rules, outlined in a 22-page document, require foreign tech companies to turn over source code, submit to audits, and build back doors into hardware and software.

However, a letter sent to a top-level Community Party cybersecurity committee in China from foreign business groups, which included the US Chamber of Commerce, has objected to the new policies, The New York Times said.

The foreign business groups expressed that such policies could potentially lead to a broader "cybersecurity review regime" by the Chinese government, which will assess the "security and controllability" of hardware, software, and technology services sold in China.

Apple recently accepted the Chinese government's inspection demands, and will allow the government to conduct network safety evaluations on its products, mainly because China is one of the biggest markets for the Silicon Valley tech giant.

The new regulations add to the escalating tension over questions about whether the Chinese government has been using tech companies to spy on foreign countries.

Chinese phone maker Xiaomi is currently being investigated by the privacy authority of the Hong Kong Administrative Region government for allegedly sending user information without consent back to servers in mainland China.

Meanwhile, Chinese telecom and internet giant Huawei has been barred by both the US and Australian governments from involvement in any broadband projects over concerns about the company's alleged links to the Chinese government.

In fact, Huawei was one company that the US National Security Agency (NSA) had spied on, according to leaked documents by former US government contractor Edward Snowden. The documents said that the NSA had conducted surveillance on Huawei's networks, email archives, and other communications between senior executives.

Huawei's chief executive Ren Zhengfei has denied the company's involvement in any espionage.

Additionally, a report by US security company Mandiant last year claimed that China was behind an "overwhelming" percentage of cyberattacks on US organisations and companies. The US had also said that hackers based in China have targeted the country's government and corporate computer networks, in order to steal sensitive data.

In separate news, Bloomberg reported that the Chinese government slammed Alibaba for failing to pay enough attention to cracking down on the sale of counterfeit merchandise, shady merchants, and misleading promotions.

Alibaba recently signed a memorandum of understanding with Microsoft to strengthen its anti-counterfeit measures on two of its e-commerce platforms, Taobao marketplace and Tmall.com.

The Chinese government's stance was made clear in a report released by the State Administration for Industry and Commerce (SAIC), which accused the company of allowing its merchants to operate without a licence, run unauthorised stores, and sell fake name-brand items.

However, Alibaba Group's executive vice chairman Joe Tsai has questioned the accuracy of the report, saying its findings were the result of flawed methodology.

"Yesterday, a so-called 'whitepaper' was posted on the SAIC website that specifically identified Alibaba and referred to a meeting between Alibaba and the regulators in July last year," said Tsai. "We believe the flawed approach taken in the report, and the tactic of releasing a so-called 'whitepaper' specifically targeting us, was so unfair that we felt compelled to take the extraordinary step of preparing a formal complaint to the SAIC."

Tsai said that the company has a broad range of measures to prevent counterfeit and pirated goods from being sold on its marketplaces, and that it is devoting more resources to the "fight against fakes".

He also acknowledged the ubiquitous nature of selling pirated goods online, but defended the company's work to weed them out of its sites.

"The issues of counterfeiting and IP protections are a part of the problems in a growing economy today, whether it is online or offline," he said. "We have a zero tolerance policy towards counterfeits on our platform because the health and integrity of our marketplaces depend on consumer trust.

"When you step back and look at our overall efforts to combat illicit activities, our track record is clear. We are certainly not perfect, and we have a lot of hard work ahead of us," he said. "In the global e-commerce marketplace, there will always be people who seek to conduct illicit activities, and like all global companies in our industry, we must continue to do everything we can to stop these activities."

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