Why China’s New Cybersecurity Law Is Bad News for Business

December 1, 2016

China’s new cybersecurity law, expected to take effect next June, could hurt any foreign firm looking to do business in the world’s second-largest economy. Though the law is intended to fight non-Chinese and Chinese hackers, it also requires that foreign companies provide China’s government with potentially sensitive information about network equipment and software. Given the weaknesses of China’s enforcement of laws around intellectual property, it’s easy to see how trade secrets can fall into the hands of Chinese competitors at the expense of the best interests of foreign firms.

Businesses most at risk will be those with special hardware and systems for network management, which could well include ATMs. Because new-generation ATMs have a much higher level of connectivity, they’re more vulnerable to hacking, which is why they require sophisticated encryption devices and software to secure transactions. This cybersecurity law thus provides the government with the legal tool to obtain all such anti-hacking proprietary security hardware and software, which could then be passed on to relevant Chinese firms. And having access to the hardware and software means firms would have access to individuals’ personal banking information, as well.

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