China Policy Could Force Foreign Security Firms Out

Via ComputerWorld.com (Aug 26, 2010) -

China is stepping up efforts to keep the security systems that protect its critical infrastructure in the hands of local firms, and that could be bad news for companies based outside the country.

China has started sending out inspectors to check for compliance with a little-known initiative called the Multi-Level Protection Scheme (MLPS), the Associated Press reported Wednesday. Introduced three years ago by China's Ministry of Public Security, it mandates that core products used by government and infrastructure companies such as banks and transportation must be provided by Chinese companies.

Over the past year, government inspectors have been telling some companies that they must switch to Chinese firewalls and other types of security technology, the AP said.

The development could force security vendors such as Cisco Systems and Symantec out of important parts of the growing market, or force them to partner with local businesses, said Stephen Kho, senior counsel with Akin Gump Strauss Hauer & Feld, an international law firm based in Washington. "Right now, it seems to only affect the companies that are in the information security sector," he said.

The MLPS regulations have been public since 2007, but it wasn't clear until recently that China would actually enforce them, Kho said. "When they put this one in place, nobody really paid any attention to it," he said. "A lot of times these laws stay on the books and they do nothing."

Critics worry that China may be leveraging security concerns to shut down free trade in its growing security products market.

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In other China news, it is reported that China is now requiring people setting up new mobile phone accounts to register with their real identities as part of a new government measure to reduce anonymity among the country's 800 million mobile users. All carriers are to adopt the real-name registration system starting this month, said China Telecom spokesman Xu Fei. Within three years, the carriers must also register the real identities of all existing users.