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April 29, 2010 2:20 pm
The Chinese government has moved to force internet and telecom companies operating in the country to turn over confidential customer information if it relates to ‘state secrets’.
The move, through amendments to the State Secrets Law passed by the standing committee of China’s legislature on Tuesday, establishes a formidable new hurdle for global companies entering the world’s largest internet and telecoms market by number of users.
The amended law, which will take effect on October 1, stipulates that “internet and other public information networking operators and service providers must cooperate in state secrets investigations by the police, state security and prosecutorial institutions”, according to a statement carried by state media.
The statement further said internet and telecom service providers had the duty to report the revelation of state secrets on their networks, keep related records and hand over the evidence to the government.
The new requirements are unlikely to make much difference to Chinese companies such as the country’s three state-owned telecom operators and its mostly privately owned internet companies. They have long operated under the assumption that they must comply with government requirements for information.
But the changes could discourage foreign internet companies from entering the Chinese market.
In 2005, a Chinese court jailed Shi Tao, a reporter, for 10 years for revealing state secrets after Yahoo handed over some of his e-mail communications, which included a confidential government document.
The company faced fierce criticism in the US for its role in the case, and the need to avoid getting drawn into a similar situation remains a key consideration in foreign internet companies’ China strategies.
“In Shi Tao’s case, China didn’t have clear legal requirements on this yet, but now resisting government or police demands for customer data is illegal,” said Mo Shaoping, a lawyer who has defended human rights activists.
The rules come a month after Google redirected its Chinese online search traffic to its Hong Kong site to avoid self-censorship demands. However, the company retains subsidiaries in China, and it is unclear whether Beijing could try to apply the new requirements to them although Google does not have mail servers in the country.
Facebook, whose social networking site has been blocked for a year now in China, has long pondered whether it should set up a presence in the country as social networking applications are spreading rapidly among China’s close to 400m internet users.
The rules could also add risk to potential investment in China’s cable or television content sector, one industry source said.
Beijing plans to kick off convergence between internet, telecom, and television networks later this year, and this development is being eyed by private equity investors who expect consolidation among cable companies and content providers. As network integration will eventually allow user-generated content to spread across the different networks, cable operators and TV content operators could find themselves responsible to respond as well, the source said.
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