China wants certain technology companies in the U.S. to commit to the country's security standards and show such commitment by turning over user data and intellectual property to the Chinese government.
Earlier this summer, China sent a letter to U.S tech companies which essentially demands an assurance from them that they will not harm the Chinese government and the country's national security. The letter also states that all Chinese users' data must be stored within the country.
As stated in the letter, U.S. tech companies are therefore asked that they "promise to accept supervision from all parts of society, to cooperate with third-party institutions for assessment and verification that products are secure and controllable, and that user information is protected, etc., to prove actual compliance with these commitments."
Industry groups have reasons to believe that requiring "secure and controllable" products will be how companies would be forced to create back doors, allow system access by third parties and hand over encryption keys or source codes.
In July, the Chinese administration signed a sweeping national security law stressing every network infrastructure and information-based system must keep the Chinese government assured that tech products are "secure and controllable."
It's not clear if a timeframe was laid down for the companies to respond to the demands in the letter, or if there are consequences to deal with if they fail to comply.
The document, according to Ars Technica, is in no way different from the other agreements that Chinese companies needed to take heed of whenever they do business with other countries like the United Kingdom. Even the U.S. has its own "opt-in security evaluation program," which is formally known as the National Information Assurance Partnership for Common Criteria.
But the Chinese government's latest move still places U.S. tech companies in an unfavorable situation. Acknowledging that China is a huge and thriving market, several companies are in a race against local rivals to establish their businesses. They need to move with great care and precautions knowing how enthusiastic the Chinese government is to enforce censorship.
To protect their businesses, some companies have decided to transfer intellectual property and cooperate with potential Chinese competitors. There are also some who promised new investments in huge financial terms and opted to use jargon as a way to gain favor from the leaders of the Chinese Communist Party.
"Everyone has assumed that it is easier in the market if you are seen as a friend of China," said senior fellow Adam Segal of the Council on Foreign Relations. "People have doubled down on that strategy now that the pressure has increased so dramatically."