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China eases rules on encryption software

BEIJING: China has eased tough new restrictions on encryption technology, announcing that a vast category of consumer software and equipment -- including mobile phones and Microsoft Windows -- would be exempt from the rules.

The government agency in charge of enforcing the rules sent a "clarification" letter to U.S. business organisations last week which steps back from the hard position it had taken when the rules were adopted on January 31.

They required all businesses and individuals to register with the government any products containing encryption technology, which protects electronic communications from eavesdropping.

Businesses and individuals would then have had to apply for permission to use the goods and officials at the State Encryption Management Commission said foreign encryption technology would be banned from sale in China.

A CLEAR BACKDOWN

That would have been a disaster for foreign makers of everything from mobile phones to Web browser software to network servers -- all of which contain such technology.

But in the letter to U.S. business organisation, which was seen by Reuters on Monday, the agency backed off from its earlier sweeping pronouncements.

The restrictions now "only limit specialised hardware and software for which encryption and decoding operations are core functions", the State Encryption Management Commission wrote.

"Other products, including wireless telephones, Windows software, browser software, etc, are not included in the scope," it said.

In a reflection of the policy shift, the agency has already given approval to Microsoft to go ahead with the launch of its new Windows 2000 operating system even though the product contains powerful encryption capability.

The letter also laid to rest fears the government would gain access to corporate secrets carried in encoded communications by requiring companies to hand over their encryption source codes.

China "will not carry out encryption key trusteeship of foreign encryption products and equipment containing encryption technology", it said. "Foreign businesses do not need to be worried about his point."

Analysts said the clarification reflected pressure from foreign business and governments and that the rules were never intended as a way to steal corporate secrets.

"The SEMC may have been overly enthusiastic in interpreting the scope of these regulations," said David Wolf, managing director of Claydon Gescher Associates in Beijing.

"There's specific intent behind this, and it's not to screw up businesses," he said. "It's the first step in creating a regime that will permit the government to maintain technological parity with criminals in the PRC." -Reuters