China Tries to Extract Pledge of Compliance From U.S. Tech Firms

The Chinese government, which has long used its country’s vast market as leverage over American technology companies, is now asking some of those firms to directly pledge their commitment to contentious policies that could require them to turn user data and intellectual property over to the government.

The government distributed a document to some American tech companies earlier this summer, in which it asked the companies to promise they would not harm China’s national security and would store Chinese user data within the country, according to three people with knowledge of the letter who spoke on the condition of anonymity.

The letter also asks the American companies to ensure their products are “secure and controllable,” a catchphrase that industry groups said could be used to force companies to build so-called back doors — which allow third-party access to systems — provide encryption keys or even hand over source code.

The document underlines the way China is wielding its power over the American tech industry. Next week, Beijing has also planned a tech forumin Seattle between China’s Internet czar, Lu Wei, and tech companies including Apple, Facebook, IBM, Google and Uber, in a show of how it can get some of the world’s leading tech players to meet even as President Obama has suggested American companies are being hurt by anticompetitive Chinese practices. The forum is timed to coincide with President Xi Jinping‘s first state visit to the United States.

The situation is tricky for American tech companies. Many are eager to take advantage of business opportunities in China before local rivals sew up the market. But they have to tread carefully given the Chinese government’s sensitivities on issues like censorship and security. Facebook and Google are among those blocked by China’s web filters from offering their core services in the country, which is the world’s biggest Internet market.

It is not clear whether any of the companies invited to the Seattle tech forum received the pledge. The document was sent by the China Internet Security Certification Center, most likely under pressure from China’s main Internet regulator, according to one of the people with knowledge of the letter.

It is also unclear when Chinese officials want a response from the companies on the pledge, but they may be hoping for some sign during next week’s tech forum, or at an Internet conference hosted by China’s Internet regulators later in the year, these people said.

The Cyberspace Administration of China did not respond to a faxed request for comment on the pledge.

Uber, Apple, Google, IBM, Microsoft and Facebook did not immediately respond to requests for comment.

The pledge contains language similar to that in a recently distributed Chinese national security law. The document begins with the statement: “Our company agrees to strictly adhere to the two key principles” and names them as “not harming national security and not harming consumer rights.” It also asks the company to make six additional promises — some seemingly innocuous, like guaranteeing product safety, and others less so, like volunteering to check that products are “secure and controllable.” That could imply an agreement to cater products to Chinese surveillance.

Over the last year, Chinese officials have sought to persuade American companies to support declarations of differing types. In a conference hosted by China’s Internet regulator last year, attendees were given little time to provide feedback on a declaration that said countries should have the right to make their own Internet laws, even if those laws mandate censorship and surveillance. The declaration was ultimately abandoned because of objections.

Signing the new pledge could set a precedent of American tech firms openly cooperating with Beijing and enabling snooping on users. Conversely, a refusal could bring fresh restrictions or penalties for companies in China’s enormous market.

For the most part, American firms have sought to follow Beijing’s wishes in China, while lobbying at home for more pushback against Chinese laws that they say restrict market access and force technology transfers.

To protect their businesses in China, some have transferred intellectual property and cooperated with would-be Chinese competitors. Some have promised huge new investments and used jargon favored by the leaders of the Chinese Communist Party.

In a recent speech, Travis Kalanick, chief executive of the ride-hailing company Uber, said that progress brought by his company had to be “in harmony with stability,” words often used by Chinese officials to signal the dangers of social and political unrest. IBM’s China marketing materials use phrases like “building a harmonious society” and “the Chinese dream,” the latter a phrase coined by Mr. Xi to signify the rejuvenation of the Chinese nation.

Earlier this month, Dell pledged to spend $125 billion in China over the next fiveyears, which is about five times the company’s value when it was taken private in 2013. In June, Cisco pledged $10 billion in investment in China over the next several years. Qualcomm earlier this year said it would help a Chinese chip maker develop advanced semiconductor materials, andIBM transferred intellectual property for one of its lines of servers to a Chinese firm.

Qualcomm declined to comment. Cisco and Dell did not immediately respond to requests for comment.

“Everyone has assumed that it is easier in the market if you are seen as a friend of China,” said Adam Segal, a senior fellow at the Council on Foreign Relations. “People have doubled down on that strategy now that the pressure has increased so dramatically.”

A report released Thursday by the Information Technology and Innovation Foundation, an industry research group, took aim at what it described as China’s mercantilist approach to innovative industries. The report said the United States should establish an industrial intelligence council, create the position of chief trade enforcement officer and restructure the way reviews of foreign investments on national security grounds are conducted.

“Disregard for international rules of market-based competition is increasingly apparent as China continues to develop a robust set of mercantilist policies, virtually all of which violate the spirit, if not the letter, of the World Trade Organization’s laws,” the report said.

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