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BEIJING (AFP) - China has watered down regulations which alarmed foreign businesses by demanding they hand over encryption software used to transfer sensitive information over the Internet.
A government statement obtained on Monday issued a "clarification" to the sweeping legislation that caused uproar among the Western business community when it emerged in January. The statement said cell phones, computer operating systems and a host of other embedded software would be exempt from the strict regulations. The regulations will only apply to applications where encryption and decoding is the "core function," the statement said.
The move is a relief for foreign businesses who had feared the regulations would force them to hand over sensitive information to the government and require the burdensome registration of nearly all software applications.
"This is the culmination of two and a half months of squawking by foreign businesses and governments," a businessman involved in the lobbying efforts to change the regulations said.
"This is a very positive step in the process, and we look forward to continued cooperation," the United States-China Business Council said in a statement. It had worked with a group of foreign business associations to convince the government to back down.
In a vaguely worded pronouncement first issued on the back pages of the People's Daily last November, the government said all users of such software would have to register with the government by January 31.
Sales of imported encryption software would also be banned, and companies would have to hand over sensitive software and encryption codes. Foreign businesses complained that the constraints were unworkable and would throttle business. In reaction to the constraints, they launched an intensive campaign.
"Relevant departments in the Chinese government realize the attention certain countries' businesses have paid to these regulations," the encryption commission said in a statement.
China also backed off its demand to hold the keys to all encryption codes used by foreign companies that would have made it impossible to evade government eavesdropping. "Foreign business do not need to worry about this point," the statement said.
A spokesman for the State Encryption Commission said sales of specialized encryption software would still be barred. "It's still not perfect, but much, much better now," a western business observer said.
What remains unclear is how the government will handle the use and sale of the special coding software necessary to protect on-line business transactions like banking or buying stocks and goods. Wholly foreign owned business will likely face no problems, but joint ventures might still need approval.
Encryption software adds a level of secrecy to electronic mail communications by allowing communicators to code and decode their messages and prevent others from monitoring private communications.
The rules – apparently aimed at keeping people from evading surveillance by state security organs – required firms to identify and register all products they are using that employ encryption technology, which is virtually ubiquitous in on-line business. A requirement that employees using the technology also be listed by name has also been dropped.
Further changes are likely. The commission said compliance with World Trade Organization regulations would require further tweaking of the rules. The deadline for registering encryption software has been extended indefinitely.
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