The U.S.' escalating feud with China over hacking charges could end up hurting IT suppliers in both countries, as suspicions and eroding trust threaten to dampen the tech exchange between the two nations.
On Thursday, China fired off the latest salvo in the dispute and announced it would vet major IT products sold in the nation for security dangers. Companies whose products don't pass the inspection process would be blocked from the market.
The news followed what's been a tense week between the U.S. and China on the long-standing issue of cyberattacks, which both nations accuse each other of. On Monday, the U.S. indicted five members of the Chinese military for allegedly hacking into U.S. companies to steal trade secrets.
China, however, is demanding the U.S. withdraw the accusations, calling them fabricated. Whether or not it's connected to the security disputes, the nation has also begun banning at least some government purchases of Microsoft's Windows 8, without saying why.
China's recent moves have analysts concerned the it is erecting trade barriers against U.S. IT suppliers. But Chinese officials have been recently elevating cybersecurity to the top of their agenda. Not only has the U.S. been repeatedly hacking China, they claim, but former National Security Agency contractor Edward Snowden has been leaking the evidence.
"The U.S. attacks, infiltrates and taps Chinese networks belonging to governments, institutions, enterprises, universities and major communication backbone networks," reads a Monday report from China's state-controlled Xinhua News Agency. "Those activities target Chinese leaders, ordinary citizens and anyone with a mobile phone."
In taking action, China's President Xi Jinping in November formed a government commission to improve national security. In March, he assembled another high-level committee to tackle cybersecurity matters.
"Xi Jinping is personally taking control of overall Internet policy and regulations, a sign of how crucial this is to China's sense of national security," said Duncan Clark, chairman of technology consultancy BDA.
While China claims such moves are for the sake of security, tighter regulations risk blocking U.S. IT suppliers from the market. The Chinese government has long favored supporting domestic IT vendors, but the cybersecurity concerns could accelerate its push away from foreign technology, according to analysts.
"Unlike in the past, China is not so dependent on U.S. vendors such as Cisco or IBM," Clark said. "With companies such as Huawei, ZTE and others, China has grown its own capabilities in telecom equipment, networking and security."
It hasn't helped that the leaks from former U.S. government contractor Edward Snowden have put further suspicion on U.S. technology companies, said Matthew Cheung, an analyst with Gartner. Cisco, Juniper Networks and Microsoft have all been used by the U.S. for spying activities, according to the leaks. In response, China's new vetting system for IT products could pave the way for a surveillance agency similar to the U.S. National Security Agency, but meant to monitor foreign enterprises, he added.
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