China calls in US tech firms

China has resumed work on a set of banking cyber security regulations it suspended earlier this year, reviving a potential source of friction with the US weeks before Xi Jinping makes his first trip to Washington as China’s president, sources said.

At a meeting last week in Beijing, officials from the China Banking Regulatory Commission told representatives from several western technology companies, including Microsoft, IBM and Cisco Systems they would seek opinions over the next month on a new version of the bank procurement rules, one of those present at the meeting said.

The previous regulations contained provisions that required Chinese banks to buy more domestic IT equipment and western tech vendors to disclose secret source code if they sell to lenders.

They drew strong protests from foreign business lobbies, the US and European governments.

Chinese regulators suspended the plan in April, saying they would weigh feedback from domestic banks.

The suspension was seen as a diplomatic victory for the Obama administration, coming shortly after visits to Beijing by treasury secretary Jack Lew and commerce secretary Penny Pritzker.

While foreign tech companies were briefly optimistic that the rules would be dropped indefinitely, their resumption now underlines China’s determination to follow through on what is considered a top national security priority for Beijing — and a persistent irritant in relations with Washington.

President Xi, who visited California in 2013, will make his first state visit next month to the White House, where cyber security disputes, including the theft of US government personnel data by suspected Chinese hackers, are expected to be on the agenda.

Executives at western companies, which make hundreds of millions of euro a year selling everything from servers to cloud computing software to China’s big banks, welcomed the opportunity to offer input, but remained sceptical that the procurement rules, even if they were revised, would reverse a recent slump in sales to China’s state-owned banks.

Many fear that even if Beijing formally rolled back some of the more onerous terms, banks would still unofficially be discouraged from purchasing foreign equipment.

Sources said the commission gave few details about how it will proceed with the regulations, but there would be better consultations.