Global firms to China: Put new cyber rules on hold

Ransomware 'WannaCry' attack explained
Ransomware 'WannaCry' attack explained

Chinese President Xi Jinping has been talking up his country's free trade credentials this week, but some of the world's biggest business groups warn that Beijing is about to put up new barriers.

Dozens of industry organizations, including the U.S. Chamber of Commerce, have sent a letter to the Chinese government over a new cybersecurity law that's due to take effect next month, calling for it to be delayed.

One of the biggest concerns about the new rules is China's plan to conduct security reviews of technology products, which the letter describes as "trade-inhibiting."

It also argues that the requirements on issues ranging from data disclosure to encryption could give Chinese companies an unfair advantage over their rivals from overseas. Foreign businesses operating in China usually need to transfer information outside the country, but the new law states that sensitive data must now be stored domestically, a move critics say will hinder trade and innovation.

Related: China's 'draconian' new cybersecurity law slammed by rights groups and businesses

The industry groups, which also include the Japan Chamber of Commerce and Industry and BusinessEurope, told the Chinese government they fear the measures will "erect trade barriers along national boundaries that effectively bar participation in your market."

"Our organizations remain concerned that China's current approach is leading to greater separation rather than integration among our economies," the letter said.

china web browser security

According to Chinese authorities, the law is intended to better protect personal information and ensure it is only collected when individuals agree to it -- and also to improve national security.

Those who violate the law can have their business activities suspended and their licenses revoked. They can also be fined up to 1 million yuan ($145,000) or even detained for up to 15 days.

Related: China fortifies Great Firewall with crackdown on VPNs

The letter from the trade groups, which was dated Monday, came amid a huge cyberattack that hit hundreds of thousands of computers around the world, including many in China. Based on software from a trove of spy tools that were either leaked or stolen from the U.S. National Security Agency, the virus took advantage of a vulnerability in Microsoft Windows to try to seize control of data.

Hua Chunying, a spokeswoman for the Chinese Foreign Ministry, said Tuesday that the attack highlighted the importance of cybersecurity.

Some experts say that much of the Chinese law mirrors data privacy measures that other countries have already put in place. However, questions remain over the process businesses will need to follow to comply with the new rules.

-- Steven Jiang contributed to this report.

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