Before Chinese President Xi Jinping made it to 1600 Pennsylvania Avenue for his meeting with President Obama this fall, his Boeing 747-400 had a layover in Redmond, Washington, where he met with chief executives from the top American technology companies. Western tech firms have come into conflict with the Chinese leadership lately, particularly over issues of encryption key demands by the Chinese and theft of intellectual property. China is worth some risk for these companies, as the cheap labor and large market create a lucrative business venture.
With the passage of China’s National Security Law this summer, the Chinese government focused a strong emphasis on domestic threats to state security. These threats include any people or groups who threaten the stability of the Chinese state—the key to the continuation of the Chinese Communist Party. This is far from the first time China has cracked down on foreign influence
The so-called “Great Firewall” of China, for example, ensures that the Chinese people are not exposed to anything the government does not want them to see. This includes everything from Facebook to Google to certain Wikipedia entries. China only allows 34 foreign films to be shown a year. Beijing continues to block cultural imports, suppress foreign religions, and expel foreign dissenters.
Xi is beginning to shut the door to China that former leader Deng Xiaoping opened to the world. He has decided that China has acquired all it needs from foreign input, leaving those who helped shaped modern China in its wake.
The technology industry is already feeling the impact of Xi’s regulations. The new law requires “secure and controllable” IT systems, though, it is unclear as to what this phrase really means. Foreign tech companies fear this is just the beginning of state encroachment into their business operations over issues Beijing chooses to deem as threats to national security.
Foreign businesses currently rank uneven enforcement or implementation of Chinese regulations as a leading challenge to business operations in China.
The newly proposed counter terrorism law would force all foreign companies to compromise the private security of their firms in the name of protecting Chinese national security. The law demands foreign entities reveal encryption keys and install security backdoors in their software. Beijing has said that this is a measure necessary to ensure China’s national security and development.
These “backdoors” would not only give Chinese officials the ability to access the information of all users within China, but has the potential to enable China to unlock data of users logging in around the globe. The anti-terrorism law would make the networks of foreign firms operating in China entirely insecure, with the potential for this insecurity to extend to their networks at home.
As China makes these bold demands, foreign companies have threatened to pull out of the People’s Republic should the plans come to fruition—a scenario that would hurt both parties. With the drafts of these national security laws being released in March, the recent months have resulted in a game of chicken between foreign companies and the Communist state. If the Chinese legislature chooses to follow through on these encryption demands, President Xi may effectively close China’s door to all foreign influence.
Alexandra Viers is an International Producer with The Cipher Brief.
