China Orders Registration of Net-Related Software

Trying to tighten its hold on the fast-moving Internet, China is ordering companies to register software used to transmit sensitive data and threatening punishment for letting government secrets slip onto the Web.

The moves, set out in regulations, could scare off foreign firms eager to tap China’s bursting Internet market and retard electronic commerce in its infancy. They also underscore the Chinese leadership’s ambivalent desire to exploit the Internet for business while constricting information considered threatening to communist rule.

“It’s like saying you want to develop railroads and then throwing down a different gauge track not used anywhere else in the world,” said William Soileau, an information technology lawyer with Denton Hall in Beijing.

Rules announced Wednesday formally extend China’s vague state secrets law to the Internet. Everyone, from Internet site to chat-room users, must gain approval from agencies protecting government secrets before publishing previously unreleased information on the Web, according to the States Secrecy Bureau regulations released in People’s Daily.

Perhaps most chilling for business are regulations ordering companies and individuals to register with the government by Monday the software used to protect transfers of sensitive information. Forms require companies to hand over the serial numbers and list the employees using the software, possibly making it easier for the government to track use.

So-called encryption software is used to prevent prying into everything from electronic mail to banking settlements. Popular products such as Netscape browsers contain encryption software, as do some Microsoft products.

China passed the regulations quietly in October. But the foreign business community became alarmed when the commission published a follow-up directive in November.

That order said that foreign companies wishing to sell products using encryption software--such as programs that operate Web sites--would have to submit the source code--the software blue prints. Software deemed unacceptable would have to be replaced with Chinese encryption software.

“This can potentially compromise the trade secrets of companies,” said Jay Hu of the United States Information Technology Office, an industry lobbying group.

Chinese Web sites have displayed a liveliness not found in the traditional and wholly state-controlled media. In recent months, Web sites have carried reports on tests of a new submarine-launched missile and a sprawling corruption scandal that has threatened to ensnare a senior party leader--both unreported by official media.

That lack of restraint comes despite repeated government regulations meant to control the Internet.