Mar 30, 11:38 PM EDT

US treasury secretary presses Beijing on technology curbs

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BEIJING (AP) -- U.S. Treasury Secretary Jacob Lew pressed Chinese leaders to suspend proposed curbs on foreign security technology and said a Beijing-led regional bank should work in partnership with existing institutions.

The United States and Europe say Beijing is improperly blocking market access with the curbs in proposed anti-terrorism and banking security measures. The measures have prompted an unusually high-level response, with U.S. Secretary of State John Kerry and other Cabinet officials writing to Beijing opposing them.

"It would be a significant barrier to U.S. companies doing business in China," Lew said Monday after meeting with the country's No. 2 leader, Premier Li Keqiang, and other officials. "I think they heard the concerns."

The bank rules take effect Wednesday, though institutions have until 2019 to have at least 75 percent of their information infrastructure certified as "secure and controllable" by the government. Suppliers worry that might require them to disclose how their products work or shift ownership of their intellectual property to Chinese entities.

"We made clear that suspending them is the right approach," said Lew. "Even as they're pending it causes a difficult environment for American businesses trying to do business in China."

Chinese officials said they were delaying implementation of the bank rules, according to a senior U.S. Treasury official who spoke on condition of anonymity. However, he gave no indication how long the delay might be.

Communist leaders are uneasy about China's reliance on foreign encryption and security technology and are trying to build up their own suppliers. Since the late 1990s, they have tried repeatedly to compel foreign suppliers to disclose how encryption products work but have dropped most of those attempts following an outcry by other governments.

In a meeting with Deputy Chinese Premier Wang Yang, Lew expressed "deep concern" about what he said were "attempts to bar technological competition."

Lew also met with his Chinese counterpart, Finance Minister Lou Jiwei.

Proposed rules would require Chinese banks to have 75 percent of their information infrastructure certified as "secure and controllable" by the government by 2019. Suppliers worry they might have to disclose secrets such as the source code at the heart of their products or shift ownership of their intellectual property to Chinese entities.

An anti-terror law under consideration by China's legislature would require network operators to build in backdoors for government surveillance, hand over encryption keys to Chinese authorities and store user data within China.

Lew also told Chinese officials the proposed Beijing-led Asian Infrastructure Investment Bank should work in partnership with existing international institutions to ensure high standards in lending, according to the Treasury official.

U.S. officials opposed creation of the AIIB, saying it might undercut the World Bank or International Monetary Fund by extending credit without adequate environmental, labor and social safeguards. Beijing scored a diplomatic coup when Britain, France and Germany broke with Washington and joined Asian governments in seeking membership.

Asked whether the United States might join the bank, the Treasury official said Lew made clear that for now, Washington wants to proceed through partnerships with other institutions. The official said Chinese leaders told Lew they would welcome U.S. membership in the Beijing-based bank.


Associated Press writer Louise Watt contributed to this report.

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