China suspends rollout of controversial cyber rules

China will suspend the rollout of new rules restricting Chinese banks’ use of foreign information technology, Reuters reported.

The decision came after Treasury Secretary Jack Lew met with Chinese officials on Monday to discuss the regulations, which the Obama administration argues will unfairly discriminate against foreign software companies.

{mosads}“We made clear that suspending them is the right approach,” Lew told reporters after his meeting with Beijing representatives, including Premier Li Keqiang. “I think the need for a process to resolve this is necessary because even as they’re pending, it causes a difficult environment for American businesses trying to do business in China.”

China has been moving on a number of new technology regulations as part of a broader counterterrorism law.

In addition to the banking rules to reduce reliance on foreign technology, a larger set of cybersecurity regulations would require companies operating in China to install Beijing-approved encryption and hand over all secret code for inspection.

Monday’s suspension represents at least a temporary win for the U.S.

The Chinese government had previously given little indication it was willing to back down.

Chinese banks had even started submitting plans to the government detailing how they would comply with the new rules.

The U.S. has gradually stepped up its opposition to the rules in recent weeks.

Earlier this month, President Obama called Chinese leader Xi Jinping directly to express his frustration with the rules. Then last week, the U.S. took its concerns to the World Trade Organization, asking China to clarify its intent in implementing the law.

While China has hit pause on the banking requirements, it doesn’t appear the country is balking yet on the wider cybersecurity rules, which have not gone into effect.

Those directives forcing businesses to adopt Chinese-chosen encryption have caused widespread consternation in the international business community. U.S. and European industry groups have been heavily lobbying their governments to intervene.