The regulations are a considerable source of friction between the USA and China

Cyber-security rules revived to control IT in Chinese banks

Cyber-security rules designed to prevent western IT technology being purchased by Chinese banks have been revived after being side-lined earlier this year.

Chinese regulators suspended the plan in April, which 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.

However, 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, that they would seek opinions over the next month on a new version of the rules, one of those present at the meeting told Reuters.

The previous regulations covered procurement of IT equipment by Chinese banks and contained provisions that would force them to purchase more domestic solutions, as well as requirements for western tech vendors to disclose secret source code if they sell to Chinese lenders.

Chinese President Xi Jinping will make his first state visit to the USA next month, where cyber-security disputes - including the theft of US government personnel data by suspected Chinese hackers - are expected to be on the agenda. News of the regulations' revival is only likely to add to tensions.

The CBRC did not immediately respond to a fax requesting comment.

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.

"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, a representative from one of the Chinese companies said.

"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 views too much Western technology in its financial system as a top national security issue. Executives at Western companies believe that even if Beijing formally rolled back some of the more onerous terms of the rules, banks would still unofficially be discouraged from purchasing foreign equipment.

Respected government-affiliated experts have defended these terms 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 USA.

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