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 In a notice issued on Monday and reviewed by Reuters, Chinese
regulators said the decision on the rules, which would have
effectively replaced foreign tech products with domestic
alternatives, came after "financial institutions in the banking
industry and related parties put forward opinions for improvements
and proposed changes."
Although U.S. technology firms, business lobbies and the White House
have been the most vocal critics of the new rules, analysts say key
opposition also likely came from within Chinese banks themselves,
which like their peers around the world run critical operations on
industry-standard products, from IBM <IBM.N> servers to Oracle Corp
<ORCL.O> databases.
"The banks themselves have a limited acceptance of domestic IT
products," said Forrester analyst Gene Cao. "The banks want to avoid
failures. For the banks, if there was a failure because of domestic
equipment, the responsibility would be on them, not necessarily the
CBRC."
The notice from the China Banking Regulatory Commission (CBRC) and
the Ministry of Industry and Information Technology said the rules
will be re-issued after they are amended but did not say how long
the process would take. The CBRC and the ministry declined to
provide immediate comment on Friday.
China has recently advanced a wave of new policies to tighten
cybersecurity roughly 18 months after former National Security
Agency contractor Edward Snowden disclosed that U.S. spy agencies
planted code in American tech exports to snoop on overseas targets.
The Chinese policies, most clearly articulated in the
bank-technology rules and a proposed counter-terrorism law, call for
greater use of "secure and controllable" technology products that
are developed in China or have released their source code to Chinese
inspectors. Foreign business groups and governments argue the rules
are unfair and motivated by protectionism and would hamper Chinese
business operations.
The United States said on Friday it welcomed the decision. "We
understand China has issued an official notice to its banking
sector, suspending banking measures that impose serious restrictions
on foreign firms. Premier Li, in my meeting with him on Monday,
conveyed this decision to me personally. We welcome this
suspension," U.S. Secretary of Commerce Penny Pritzker said in
emailed comments to Reuters.
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DRY RUNS
Anticipating the official announcement of the bank rules last
December, technology departments at China's large banks have been
testing running Chinese equipment since early last year, mostly with
non-critical operations, according to people with knowledge of the
matter.
"I think the government concern is reasonable, but it's technically
impossible to comply with such rules," said a banker at a foreign
bank in China who declined to be identified because of the
sensitivity of the matter.
The notice came on the same day when 31 foreign trade associations
urged Chinese leaders to "suspend implementation of the guidelines
through a written public notice...and initiate a formal public
consultation consistent with China's international obligations."
Analysts say there is little doubt that Chinese leaders are
committed to weaning the country off foreign technology and
developing domestic contenders as a long-term ambition.
China is also working on an anti-terrorism law that would require
foreign companies to hand over encryption keys, triggering U.S.
protests.
Reuters reported in March that China had agreed to delay
implementing the technology restrictions, which have grown to become
a major irritant in U.S.-China relations.
Washington has said it is working with allies in Europe and Japan to
break down the Chinese barriers and had requested through the World
Trade Organization that Beijing clarify the banking technology
rules.
(Additional reporting by Engen Tham and John Ruwitch in SHANGHAI;
Editing by Richard Borsuk and Muralikumar Anantharaman)
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