China Says Tech Firms Have Nothing to Fear From Counterterrorism Law

China's proposed anti-terrorism law will not affect the legitimate interests of technology firms, a top Chinese spokeswoman said Wednesday after US President Barack Obama warned of its impact and demanded amendments.

China's proposals, which would require tech firms to provide encryption keys and install backdoors granting law enforcement access for counterterrorism investigations, drew criticism from Obama, who told Reuters in an interview this week China would have to change the draft law if it were "to do business with the United States".

Fu Ying, China's parliamentary spokeswoman, said many Western governments, including Washington, had made similar requests for encryption keys while Chinese companies operating in the United States have long been subject to intense security checks.

China's proposals were "in accordance with the principles of China's administrative law as well as international common practices, and won't affect Internet firms' reasonable interests", Fu said.

Fu made the remarks during a news conference carried live on state television a day before the start of the National People's Congress, the largely rubber-stamp parliamentary session held every spring in Beijing.

China's increasingly restrictive cyber-security policies enacted in the wake of Edward Snowden's disclosures of US spying programmes have become a source of considerable friction in bilateral relations. Also at issue has been a set of financial sector regulations that pushes China's state-owned banks to buy technology from domestic vendors.

Foreign business lobbies say the rules are unfairly sweeping names like Cisco and Microsoft out of the world's second-largest economy, while Chinese officials point to the treatment of Huawei and ZTE Corp, two Chinese telecoms equipment makers that have been effectively locked out of the US market on cyber-security grounds.

The German ambassador to China, Michael Clauss, also expressed concern that the cyber-security policy "could make market access for foreign companies in China much more difficult".

Fu said China hoped foreign companies would continue to "support, participate and continue to walk forward" with China's reform efforts.

The remarks were more measured than a commentary published by the official Xinhua news agency, which said Obama's warning to China was evidence of "arrogance and hypocrisy".

"With transparent procedures, China's anti-terrorism campaign will be different from what the United States has done: letting the surveillance authorities run amok and turn counterterrorism into paranoid espionage and peeping on its civilians and allies," Xinhua said.

US business lobbies have said the proposed regulation would render secure communications unfeasible in China and handing over such commercially sensitive information would seriously harm their credibility. The head of the American Chamber of Commerce in Shanghai, Kenneth Jarrett, called for more discussions with the Chinese government.

Fu, the parliamentary spokeswoman, said China would continue to amend the counterterrorism law but would not compromise its national security priorities.

"We will definitely continue to listen to extensive concerns and all parties' views, so we can make the law's formulation more rigorous," she said. "On the other hand, fundamentally speaking, (the law) will reflect our country's counter-terrorism interests."

© Thomson Reuters 2015