Statement by Ambassador Clauss on cyber regulation ahead of the 19th Party Congress

The 19th Party Congress will, among other things, give signals on whether the trend of further opening up is meant to continue or not. One important indicator may be recent developments concerning cyberspace. China’s continued economic success increasingly depends on the digitalization of its economy and the integration of its society into the global flow of information and ideas. The recent blocking of WhatsApp, however, has added to the growing concern of the international business community about China’s efforts to further restrict access to international information and unimpeded communication across borders. While companies are still struggling with the implications of China’s new cybersecurity law, recent reports about the Chinese government’s plan to block the use of foreign VPN connections have struck them a new blow.

Secure and unhampered end-to-end-communication is essential for foreign companies and a prerequisite for advanced manufacturing, including Industry 4.0 applications. Because of the new cybersecurity law, which entered into force on 1 June 2017, foreign companies are already worried that sensitive information, business secrets and knowhow will be exposed to third parties. Many in the foreign business community also complain about the extensive scope of the law and its unpredictable implementation.

A possible VPN ban has further increased worries. Unrestricted internet access via VPN is vital if China wants to take maximum advantage of international cooperation in research and development as well as academic and cultural exchange. If fully implemented, both Chinese and foreign netizens would be unable to access any of the approximately 3,000 currently blocked websites, including various online services. More importantly, it would be difficult if not practically impossible for individuals and companies alike to communicate in a safe and confidential electronic environment. Chinese authorities’ attempts to reassure foreign businesses by stating that they could rely on “state-licensed” VPN services increased their concerns rather than providing relief.

The challenge is to find the right balance between the needs of so-called “cyber sovereignty” and a vibrant modern Chinese economy and society. If digital communication was throttled, it could have detrimental effects for China’s relationship with the outside world, including Germany. Would an increasingly restrictive digital environment foster innovation? Would the world’s most cutting edge technologies and business models still be drawn to the Chinese market? Could people-to-people dialogues thrive in the 21st century? The higher the digital wall grows, the less attractive living and working in China will be for professionals, researchers or artists and their respective families. Economists have already warned against the possible impact of companies’ increasing uncertainty on the investment climate. Our repeated requests to discuss these topics with relevant authorities have not led to meaningful dialogue so far. An open exchange is urgent, however, to look into pragmatic solutions, for example for foreign companies and organizations. In the “offline” world, our overlapping economic and political interests bring us closer together, but this trend may not be sustainable if excessive cyber controls drive us apart.