[Infowarrior] - China to make foreign firms reveal secret info

[Richard Forno]

China to make foreign firms reveal secret info

The Yomiuri Shimbun

http://www.yomiuri.co.jp/dy/business/20080919TDY01306.htm

The Chinese government plans to introduce a new system requiring  
foreign firms to disclose secret information about digital household  
appliances and other products starting from May, sources said Thursday.

The envisaged system is likely to target products such as IC cards,  
digital copiers and possibly flat-panel TVs.

If a company refuses to disclose such information, the Chinese  
government plans to ban the firm from exporting the product to the  
Chinese market, as well as bar production and sales in the country,  
according to the sources.

Critics worry that such a system risks seeing the intellectual  
property of foreign firms passed onto their Chinese competitors.

In addition, the envisaged system poses security concerns if coding  
technology used in digital devices developed in other countries is  
leaked to China, they added.

Observers say the issue could develop into a serious international  
trade dispute, with Japan's Economy, Trade and Industry Ministry and  
U.S. Trade Representatives expected to urge the Chinese government to  
drop the plan.

The Chinese government is calling the planned system an "obligatory  
accreditation system for IT security products," according to the  
sources.

Specifically, foreign companies will be obliged to disclose relevant  
products' source code, or a sequence of statements written in computer  
programming language designed to control digital appliances and other  
high-tech products.

The system, whereby manufacturers will be allowed to sell their  
products on the Chinese market only after they pass tests based on  
disclosed source code and inspections by an accreditation body, is  
said to be unprecedented.

Products expected to be subject to the system are those equipped with  
secret coding, such as the Felica contactless smart card system  
developed by Sony Corp., digital copiers and computer servers.

The Chinese government said it needs the source code to prevent  
computer viruses taking advantage of software vulnerabilities and to  
shut out hackers.

However, this explanation is unlikely to satisfy concerns that  
disclosed information might be handed from the Chinese government to  
Chinese companies.

There also are fears that Chinese intelligence services could exploit  
such confidential information by making it easier to break codes used  
in Japanese digital devices.

Source code is considered a company's intellectual property. Microsoft  
Corp., for instance, kept secret its Windows' source code, helping it  
earn huge profits from licensing.

(Sep. 19, 2008)