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China’s Cybersecurity Law: Game over for foreign firms?

Phil Muncaster | Dec. 8, 2016
Will the new cybersecurity law benefit organisations?

A new plan

But when it comes to foreign companies in China - tech and otherwise - can they really feel aggrieved and surprised at what's happened? After all, many of the Cybersecurity Law's provisions were already in force. And since new president Xi Jinping came to power there's been a gradual tightening of rules, corruption investigations and other measures designed to discomfit foreign firms.

Qualcomm was forced to pay out almost $1bn in an antitrust case, and even Microsoft has been on the receiving end of an investigation. Last year a law was passed meaning tech destined for government and critical sectors had to be "secure and controllable". Many believe this could lead to firms being asked to hand over source code and other trade secrets, despite Beijing's protestations otherwise.

Anti-censorship crusader Charlie Smith, co-founder of Greatfire.org, has little sympathy for those MNCs.

"The Chinese authorities kept pushing back on foreign companies to see how much they would take. The more they pushed, the more foreign companies wilted. The authorities actually 'conceded' and removed the demand that foreign companies keep all of their data in China," he told me by email.

"These companies - Apple, LinkedIn, Microsoft and the like - should shoulder a lot of the blame here. They could have stood up together in unison against the authorities. Instead, they practically helped to write the law and, as a result, the Chinese authorities will continue their assault on the basic rights of the Chinese people."

What this means in the long term is the marginalisation of US tech firms in China. Apple's China revenues fell 30% in the fiscal fourth quarter as local rivals flourished, and Cisco continues to struggle in the face of competition from Huawei and ZTE.

But you can bet that they'll all be there right until the last chopper leaves, trying to squeeze every last drop of revenue from the country. In reality, what they need is a Plan B.

 

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