Who Are the Winners and Losers From China's New Cybersecurity Legislation?

China's cyber security policy could have a big negative affect global information technology (IT) sectors, according to experts.

WASHINGTON, January 31 (Sputnik) — China's new enhanced cybersecurity policy is not only detrimental to global information technology (IT) sectors, but others, and could erode the diplomatic relationship between Washington and the People's Republic of China, experts told Sputnik Saturday.

Beijing's new regulations would require technology products being sold to China to be assessed for security risks, requiring companies to hand over the secret source codes of their products to Beijing and undergo "intrusive security testing." On Wednesday, over a dozen US trade and business organizations sent a letter to the Chinese cybersecurity officials urging to postpone the new regulations.

"The Chinese regulations are across the board and would apply to all companies selling to China," the Vice President for International Trade at the Consumers Electronics Association (CEA), Sage Chandler, told Sputnik. Chandler works for one of the organizations that signed the letter to the Chinese government.

Chandler warned that China's new cybersecurity policy would not only affect Beijing's "own companies" and "own economy," but also would create ripple effects that could be "much more far reaching… spreading out to a number of other industries," including the financial sector.

According to Wednesday's letter to the Chinese government, the trade and business organizations cautioned Beijing that "an overly broad, opaque, discriminatory approach to cybersecurity policy" restricting global Internet and IT products would ultimately "isolate Chinese ICT [information communication technology] firms from the global marketplace and weaken cybersecurity thereby harming China's economic growth and development and restricting customer choice."

Although the Chinese companies could potentially benefit from the new set of regulations, the policy would likely ruin the progress being made on bilateral relations between Beijing and Washington, Director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies (CSIS), Scott Kennedy, told Sputnik.

"If the Chinese stick to it, some Chinese companies that provide IT equipment and services will stand to gain but it will be detrimental to China's overall IT sector…" Kennedy said. "I think it would be a small victory for a small segment of the Chinese sector to the detriment of the financial sector and to the diplomatic relationship."

Yun Sun, an East Asia Fellow at the Stimson Center, said that although China cybersecurity is being primarily motivated by national security concerns, Beijing's policy is far from being fair.

"There is no way to ensure that China will not use such knowledge beyond its claimed national security goals, on others or for its own benefits," Sun said.

Since CEA and the dozens of other trade and business organizations sent the letter to Beijing earlier in the week, Chandler told Sputnik that the Chinese government has yet to respond to the their request to postpone the new policy. However, Chandler added that they would continue to work with key officials both in the United States and in China to change the Beijing's regulations.

China's new enhanced cybersecurity policy follows Beijing's attempts to revise cybersecurity standards after US National Security Agency's (NSA) former employee Edward Snowden revealed the broad scope of the United States' government mass surveillance program. The NSA was revealed to have embedded "backdoor" surveillance code in US software and hardware sold overseas.

This came after Washington blocked China's tech giant Huawei last spring from selling its products in the United States for the same reason, fearing that the tech-producer could plant code in its technology that the Chinese would exploit to access sensitive information.