China Discreetly Questioning U.S. Tech Companies over Security

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Authorities in China are discreetly questioning U.S. technology companies selling products in the country over potential security threats, according to the New York Times based on information from people familiar with the situation.

A committee linked to the Cyberspace Administration, China internet control bureau, is conducting the security reviews, which are focused on the data storage and encryption on foreign technology products. The bureau is composed of experts and engineers tied with the country’s military and security agencies.

The sources who requested anonymity said the employees and executives of foreign companies are required to personally answer questions regarding the products.

China’s security reviews targeted big U.S. technology companies including Apple Inc. (NASDAQ:AAPL), Cisco Systems (NASDAQ:CSCO) and Microsoft Corporation (NASDAQ:MSFT). The Chinese government hasn’t disclosed its reason behind the checks and interrogations.

U.S. government & tech companies are concerned

The U.S. government and tech companies are concerned that China may use the reviews to obtain intellectual property/trade secrets, and to ensure that the products are not being used for spying.

Tech companies are also worried that China’s reviews will serve as a precedent, and prompt other countries to do the same.  The U.S. government is in a difficult position to object and raise its concerns about the reviews because of the lack of disclosure by China.

China started its security reviews on foreign technology companies early last year, according to a Chinese news agency. The country’s internet regulator stated its intention to conduct reviews three years ago following the revelations of former NSA contractor Edward Snowden about spying.

China’s security reviews stand out

The Cyberspace Administration of China said its security reviews is not targeting any particular country or product.

The New York Times noted that China’s security reviews stand out because it is not limited to government and military technology unlike the inspections of the United States and the United Kingdom. China is also inspecting consumer gadgets.

Last month, Bruce Sewell, the general counsel of Apple told lawmakers during a congressional hearing that the Chinese government asked the tech giant to share its source code for the iPhone over the past two years. The iPhone maker rejected its request.

Apple is facing challenges in China as regulators shut down its mobile entertainment services including its iBooks and iTunes Movies stores.

The tech giant recently announced its $1 billion investment in Didi Chuxing, the leading private car hailing company in the country as part of its initiative to strengthen its relationship with the Chinese government

Apple CEO Tim Cook explained, “We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market. Of course, we believe it will deliver a strong return for our invested capital over time as well.”