In a speech last month, China's president Xi Jinping had some telling comments around what technology companies can expect in the future as they try and sell into the Chinese market.
According to the New York Times, Xi's outlined the direction in which he is planning to take China as it relates to technology and cyber security. "One viewpoint holds that we must close ourselves off, make a fresh start, thoroughly shake off reliance on foreign technology and rely on indigenous innovation to pursue development. Otherwise, we would always follow in the footsteps of others." Xi said. Adding that China must find a middle ground and determine "which things can be imported but have to be secure and controllable; which things may be imported, digested and absorbed for re-innovation; which things can be developed in collaboration with others; and for which things we must rely on our own strength and indigenous innovation."
Said otherwise, China is going to clamp down even more on tech imports, even admitting that the products will be reverse engineered and reproduced in China, very much as the country has done in its manufacturing sector.
Knowing that, it is not surprising that the Times is reporting that China is conducting security reviews on technology products sold in China by the likes of Apple and other companies. The reviews are alleged to even require employees of the tech companies to answer questions about the product in person.
Apple and other companies in recent months have been subjected to reviews that target encryption and the data storage of tech products, said people briefed on the reviews who spoke on the condition of anonymity. In the reviews, Chinese officials require executives or employees of the foreign tech companies to answer questions about the products in person, according to these people.
The reviews are run by a committee associated with the Cyberspace Administration of China, the country’s Internet control bureau, they said. The bureau includes experts and engineers with ties to the country’s military and security agencies.
While other countries, including the United States and Britain, conduct reviews of some tech products, they usually focus on products that will be used by the military or other parts of the government that are concerned with security, and not on products sold to the general public.
The Chinese reviews stand out because they are being applied more broadly, including to American consumer software and gadgets popular in China, the people briefed on the reviews said. And because Chinese officials have not disclosed the nature of the checks, both the United States government and American tech companies fear that the reviews could be used to extract tech knowledge as well as ensure that the United States was not using the products to spy.
Meanwhile, the lack of disclosure by China's government around the topic has made it difficult for the US government to voice any objections, but during a congressional hearing last month, Apple's general counsel Bruce Sewell said that the Chinese government had in fact asked the company to share source code in the last two years, but that Apple had refused.
According to some even more cynical than us, the recent purchase by Apple of a $1 billion equity stake in China's Uber-equivalent Didi was nothing more than paying tribute to Beijing to be allowed to continue participating in Apple's lucrative services market on the maindland. If true, expect Tim Cook to make many more such seemingly incongruous "investments" in Chinese companies in the coming months.
Chinese restrictions have been a diplomatic stumbling block the Obama administration has raised concerns about. China had written some rules to wean the country's banking industry off foreign technology, as well as calling for foreign companies to hand over encryption keys - in both cases China backed down, for now.
While China may be applying its security reviews and control over products in such a manner that makes it difficult for foreign companies to sell into the market if they wish to keep trade secrets, not to mention stifles its citizens access to information (as evidenced by Chinese regulators recent decision to shut down iBooks and iTunes movies), let us not forget that the US government prodded Apple for precisely the same information that it accuses China of trying to obtain. To be sure, the US government's motives in cases such as this one are always "pure."