Chinese banks have suspended plans to heavily regulate their financial technology, according to a notice issued by the banks.
US officials in Washington have been attempting to influence this decision by stating that US businesses would be excluded from the Chinese market. They have also tried to encourage Beijing on a number of other new cyber security rules including data transfer restrictions and a draft counter-terrorism law.
The notice was issued by the China Banking Regulatory Commission (CBRC) and the Ministry of Industry and Information Technology (MIIT) this week and stated that the regulations would be revised and reissued after feedback had been requested.
A banking regulator told the Financial Times that “the relevant Chinese agencies are revising and perfecting the guidelines. The Chinese government’s commitment to openness and fulfilling World Trade Organisation rules won’t change, and promoting information security in the banking industry is completely necessary.”
Earlier this year, rules were put in place which give Chinese banks until 2019 to ensure that 70% of their technology products qualify as “secure and controllable” under Chinese law. However, the CBRC and MIIT initially wanted compliance reports from banks by 15 March so that they could be put into practice by the start of this month.
Some US industry figures believe that the reluctance to take on further banking regulations could be due to China favouring local domestic producers rather than foreign imports.
Penny Pritzker, US commerce secretary who recently travelled to Beijing says that the “impression and the perception of some companies is that China is really preferring its indigenous companies, and that it is making it harder for foreign companies to participate in the economy.”
In addition to this, James McGregor, Greater China Chairman of Apco, the business consultancy said the hesitance to undertake banking rules was probably because Chinese technology companies were not yet capable of living up to US standards. “This is likely a tactical retreat as the Chinese authorities take another look at what is do-able and what is not in replacing foreign technology,” McGregor said.
Reports suggest that Chinese banks have decided to take this stance out of the fear that they will be forced into adopting inferior encryption, credit-card chips and other technologies that will expose them to data loss.
Despite the data protection regulation being implemented in 2018, 69% of IT decision makers don’t have the backing of their board to achieve GDPR compliance, according to Calligo.
The majority of the region’s 28 member states report that the situation has worsened over the past year, reports business management consultant Verisk Maplecroft.
Regulators in the UK, the US and Hong Kong instituted proceedings against more than 1,700 individuals last year, or four times the number of cases brought against companies.
The US Commodity Futures Trading Commission approved LedgerX as the first regulated clearing house for derivatives contracts settling in digital currencies.