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China Says "Show Us How You Protect That Stuff"

The Associated Press is reporting that the Chinese government is stirring trade tensions with Washington with a plan to require foreign computer security technology to be submitted for government approval, in a move that might require suppliers to disclose business secrets.

Rules due to take effect May 1 require official certification of technology widely used to keep e-mail and company data networks secure. Beijing has yet to say how many secrets companies must disclose about such sensitive matters as how data-encryption systems work. But Washington complains the requirement might hinder imports in a market dominated by U.S. companies, and is pressing Beijing to scrap it.

"There are still opportunities to defuse this, but it is getting down to the wire," said Duncan Clark, managing director of BDA China Ltd., a Beijing technology consulting firm. "It affects trade. It's potentially really wide-scale."

Beijing tried earlier to force foreign companies to reveal how encryption systems work and has promoted its own standards for mobile phones and wireless encryption.

Those attempts and the new demand reflect Beijing's unease about letting the public keep secrets, and the government's efforts to use its regulatory system to help fledgling Chinese high-tech companies compete with global high-tech rivals. Yin Changlai, the head of a Chinese business group sanctioned by the government, has acknowledged that the rules are meant to help develop China's infant computer security industry by shielding companies from foreign rivals that he said control 70 percent of the market.

The computer security rules cover 13 types of hardware and software, including database and network security systems, secure routers, data backup and recovery systems and anti-spam and anti-hacking software. Such technology is enmeshed in products sold by Microsoft Corp., Cisco Systems Inc. and other industry giants.

Giving regulators the power to reject foreign technologies could help to promote sales of Chinese alternatives. But that might disrupt foreign manufacturing, research or data processing in China if companies have to switch technologies or move operations to other countries to avoid the controls. Requiring disclosure of technical details also might help Beijing read encrypted e-mail or create competing products.

Full post as published by Womble Trade Secrets Blog on December 08, 2008 (boomark / email).