At a meeting last week in Beijing, officials from the China Banking
Regulatory Commission (CBRC) told representatives from several
Western technology companies, including Microsoft, IBM and Cisco
Systems, they would seek opinions over the next month on a new
version of the bank procurement rules, one of those present at the
meeting said.
The previous regulations - containing provisions that required
Chinese banks to buy more domestic IT equipment and Western tech
vendors to disclose secret source code if they sell to lenders -
drew strong protests from foreign business lobbies, the U.S. and
European governments.
Chinese regulators suspended the plan in April, saying they would
weigh feedback from domestic banks. The suspension was seen as a
diplomatic victory for the Obama administration, coming shortly
after visits to Beijing by Treasury Secretary Jack Lew and Commerce
Secretary Penny Pritzker.
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While foreign tech companies were briefly optimistic that the rules
would be dropped indefinitely, their resumption now underlines
China's determination to follow through on what is considered a top
national security priority for Beijing - and a persistent irritant
in relations with Washington.
Xi, who visited California in 2013, will make his first state visit
next month to the White House, where cyber security disputes,
including the theft of U.S. government personnel data by suspected
Chinese hackers, are expected to be on the agenda.
The CBRC did not immediately respond to a fax requesting comment.
SLUMP IN SALES
Executives at Western companies, which make hundreds of millions of
dollars a year selling everything from servers to cloud computing
software to China's big banks, welcomed the opportunity to offer
input, but remained skeptical that the procurement rules, even if
they were revised, would reverse a recent slump in sales to China's
state-owned banks.
Many fear that even if Beijing formally rolled back some of the more
onerous terms, banks would still unofficially be discouraged from
purchasing foreign equipment.
People familiar with the meeting said the CBRC provided few details
about how they will proceed with the regulations, but there would be
more thorough consultations than used for drafting the earlier
rules.
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"Their attitude and approach were good, but there's not much
optimism," said the individual who attended the meeting. "What
matters is how the sales numbers look."
High-level executives at Chinese technology companies, which could
gain from a retreat of Western rivals in China, were made aware last
month that the banking sector rules will not be dropped altogether,
said a person from one of those companies.
"No one doubted they were going to come back," said another of those
familiar with last week's meeting. "We're all still trying to wrap
our heads around it."
China, fearing the reach of the U.S. National Security Agency's
cyber spying capabilities, has advanced several cyber security
measures in recent months. Respected government-affiliated experts
have defended these as reasonable and fair, noting that intense
political opposition from Capitol Hill has essentially locked out
Chinese manufacturers Huawei and ZTE from selling telecom equipment
in the United States.
Still, the banking sector regulations have been criticized by the
United States and Europe as protectionist measures that unfairly
exclude foreign products and potentially violate China's obligations
as a member of the World Trade Organization.
CBRC officials appeared sensitive to the criticism, saying at last
week's meeting they had consulted China's Ministry of Commerce and
WTO experts to ensure that its proposals would meet China's
free-trade obligations, according to the person who attended the
meeting.
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Spokespeople for Microsoft and IBM said they had no comment on the
matter at this time. A Cisco spokesman said the company "does not
comment publicly on specific customer meetings."
(Reporting by Gerry Shih, Michael Martina and Matthew Miller;
Editing by Ian Geoghegan)
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