G/TRIMS/W/150
26 March 2015
(15-1703)  Page: 1/2
Committee on Trade-Related Investment Measures  Original: English
 
CHINA – LOCAL CONTENT REQUIREMENTS FOR PURCHASES OF TECHNOLOGY  
BY THE BANKING SECTOR 
QUESTIONS FROM THE UNITED STATES 
The following communication, dated 25 March 2015, is being circulated at the request of the 
Delegation of the United States. 
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 The United States is concerned about a recent measure issued by Chinese authorities which appears to place local content requirements, referred to as indigenous innovation requirements, on 
ICT equipment used by the banking sector. The measures in question are the Guidelines for 
Promoting the Application of Secure and Controllable Information Technology in Banking Sector ("Guidelines") and the accompanying Classification Catalogue of Banking Information Technology 
Assets and Indexes of Security and Controllability ("Catalogue"), issued by the China Banking 
Regulatory Commission on 26 December 2014. Thes e measures are framed in terms of improving 
cybersecurity in an important sector. We do not question the right of WTO Members to take steps 
to improve cybersecurity. However, we are concerned that the Guidelines reflect a definition of 
"secure and controllable" technology that would severely limit access to China's commercial banking sector for many foreign ICT products, se rvices and technologies, and would dictate the 
business decisions of financial institutions, including foreign financial institution investors. 
 
The Guidelines include the objective of "promoti ng the development of the strategic emerging 
industries." A key policy objective of the Guidelines is to encourage indigenous innovation, and 
"utilize the banking sector's informatization needs to cultivate and drive the market." To this end, 
financial institutions are specifically tasked with "[a]ctively push[ing] indigenous innovation of information technology" as follows: 
 
The banking financial institutions shall be active in attempting the use of secure, reliable information technology innovated indigenously, and raise improvement needs through applications, making innovative technologies widely appropriate and robust; 
explore to, through harmonizing standards, overall plans for products, joint efforts to 
tackle problems and pilot projects, speed up the process of making indigenously innovative information technologies more appropriate and the optimization of system. 
When choosing technology, if secure and reliable products and technologies innovated 
indigenously are available, at least one vend or of such products and technologies shall 
be introduced for technology selection and testing; in case of vendors providing 
specialized equipment or integration solutions, both the hardware and software used 
in their solutions shall respectively adopt at least a secure and reliable product or technology innovated indigenously. 
The policies and taskings of the Guidelines appe ar to be implemented by the Catalogue. Among 
other things, the Catalogue raises concern that the requirement for a product to be "indigenous" 
would allow for little involvement by foreign companies. The Catalogue defines "indigenous IPR" as "IPR exclusively owned by and relatively controlled  by Chinese citizens, corporate legal persons or 
non-legal person institutions, i.e. IPR that is owned legitimately and whose rights can be exercised 
independently, or IPR that is not exclusively ow ned but whose rights could be exercised within a 
long period, and on which integration innovation  and innovation based on assimilation can be 
implemented without any restrictions from others." 
 G/TRIMS/W/150 
 
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  The catalogue also specifies that 100% of new pu rchases by the banking industry of computer 
servers, desktop computers and laptop computers and 50% of new purchases of tablets and smartphones must meet "security and controllabili ty" requirements. We question to what extent 
China's "security and controllability" requirements reflect an emphasis on the use of local products, 
as set out in the objective noted above.  
 We note that such requirements favouring locally produced products could have implications under 
the TRIMS agreement. We note further that Chin a's WTO accession commitments require that all 
state-owned and state-invested enterprises are to make purchases based solely on commercial considerations, and that the enterprises of other WTO members will have an adequate opportunity to compete for sales to these enterprises on non-discriminatory terms and conditions.  
 
Questions for China:  
 
1.  What is the current status of the Guidelines  and the Catalogue? Does China plan to publish 
the Guidelines and the Catalogue? Are they currently in effect? 
 
2.  Would China please describe the proce ss for enforcement of the Guidelines and the 
Catalogue? What is the result if a bank purchases more foreign technology than set out in the Guidelines? Can excess purchases of domestic technology in one category offset insufficient purchases of such technology in another? 
 
3.  The Guidelines state that a vendor of indigenous technology must be considered "if secure 
and reliable products and technologies innovated indigenously are available." Who will 
determine whether indigenous technology is "secure," "reliable" and "available," and what 
factors will be considered in making that determination? 
 
4.  Do the Guidelines apply to foreign-owned banks operating in China?  
 5. In the Catalogue, the requirements pertaining to many product categories, including 
computers and network equipment, state that "end-product technology risks and supply 
chain risks" must be "controllable." Could China explain what "controllable" means? Is there 
a standard for determining what qualifies as "controllable"?  
 
6. Could China please explain the rationale for Principle II.2 ("Encourage Indigenous 
Innovation"), which seems to be further implemented in Section III.4 ("Tasking and Requirements").  
 
a. Is the premise of this principle that indige nously-developed technologies are different 
than those developed abroad in a relevant way? What is the basis for this premise? 
b. Does China exclude the possibility that foreign-developed technology may provide a 
better security solution than a technology developed indigenously?  
7.  Fifteen products in the categories of Network Equipment, Storage equipment, Security 
Equipment and Self-Service equipment are subjec t to the requirement that chips or software 
integral to those products are "under indigenous IPR". 
 
a. What is "indigenous IPR"? 
b. Is there a standard for what qualifies as "indigenous"? (E.g. a percentage of lines of code 
written by a Chinese national? Code that is written in the territory of China? Code for which the copyright is registered in China?) 
c. What is the relationship between the "indigenous" character of software (however 
"indigenous" is defined), and China's policy objectives?  What does China consider to be 
the relevant difference between "indigenous" software and non-indigenous software? 
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