Obama sharply criticizes China’s plans for new technology rules

WASHINGTON (Reuters) – President Barack Obama yesterday sharply criticized China’s plans for new rules on US tech companies, urging Beijing to change the policy if it wants to do business with the United States and saying he had raised it with President Xi Jinping.

In an interview with Reuters, Obama said he was concerned about Beijing’s plans for a far-reaching counterterrorism law that would require technology firms to hand over encryption keys, the passcodes that help protect data, and install security “backdoors” in their systems to give Chinese authorities surveillance access.“This is something that I’ve raised directly with President Xi,” Obama said. “We have made it very clear to them that this is something they are going to have to change if they are to do business with the United States.”

The Chinese government sees the rules as crucial to protect state and business secrets. Western companies say they reinforce increasingly onerous terms of doing business in the world’s second-largest economy and heighten mistrust over cybersecurity between Washington and Beijing. A Chinese parliamentary body read a second draft of the country’s first anti-terrorism law last week and is expected to adopt the legislation in the coming weeks or months.

The initial draft, published by the National People’s Congress late last year, requires companies to also keep servers and user data within China, supply law enforcement authorities with communications records and censor terrorism-related Internet content.

The laws “would essentially force all foreign companies, including U. companies, to turn over to the Chinese government mechanisms where they can snoop and keep track of all the users of those services,” Obama said.

“As you might imagine tech companies are not going to be willing to do that,” he said. The scope of the rules reaches far beyond a recently adopted set of financial industry regulations that pushed Chinese banks to purchase from domestic technology vendors.

The implications for Silicon Valley companies, ranging from Microsoft Corp to Apple Inc  have set the stage for yet another confrontation over cybersecurity and technology policy, a major irritant in US-China relations.

Obama said the rules could also backfire on China.

“Those kinds of restrictive practices I think would ironically hurt the Chinese economyover the long term because I don’t think there is any US or European firm, any international firm, that could credibly get away with that wholesale turning over of data, personal data, … to a government,” he said.

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