On August 11, 2015, a group of 19 U.S. business groups, including the U.S. Chamber of Commerce and the US-China Business Council, sent a letter to President Barack Obama urging him to push China to change its cybersecurity rules.  Next month, President Obama will meet Chinese President Xi Jinping, and the business groups’ letter urged President Obama to lobby President Xi to curtail the use of cybersecurity rules as a shield for Chinese businesses against foreign competition.  According to Chinese officials, these cybersecurity rules are required to ensure the security of Chinese firms’ networks, particularly in the banking and information and communications technology (“ICT”) sectors.  However, in the letter from the U.S. business groups to President Obama, they made clear their view that these rules are anti-competitive, as they require foreign technology providers to surrender source code and other sensitive information as a condition of doing business within China.

The upcoming meeting between Presidents Obama and Xi is part of a bilateral summit in Washington, D.C., that will likely cover a range of economic and strategic topics relating to U.S.-China relations, including cybersecurity.  At this meeting, the business groups have demanded in their letter to the President that the U.S. and China each broadly reaffirm their commitment to open markets and acknowledge the mutual benefits each side gains from such an arrangement.  The letter states that, “[i]n particular, both sides should commit to refrain from embedding in their national security laws, regulations, and policies specific requirements related to economic security that are designed to advance policies that distort markets and restrict open competition.”  Tensions between the two countries in this area have risen since 2013, when former National Security Agency contractor Edward Snowden revealed that the U.S. government had planted “back doors” in software products from America’s biggest technology companies in order to spy on communications.  Since that time, hackers in China have been suspected of being behind the massive data breach at the U.S. Office of Personnel Management.

Reporter, Ehren K. Halse, San Francisco, +1 415 318 1216, ehalse@kslaw.com.