China reveals IT-focused economic vision

China’s 10-year plan to revitalize its manufacturing sector will focus on boosting domestic production of information technology, which foreign governments are warning will be difficult if the country’s pending cybersecurity rules go into effect.

The grand “Made in China 2025” strategy was unveiled Tuesday, outlining an aspirational plan to keep Chinese industry competitive amid slowing economic growth and rising wages that have hurt the country’s attractiveness to overseas manufacturers.

{mosads}Broadly speaking, the strategy promotes heavy investments in high-tech sectors, such as space travel, high-speed rail, biomedicine, energy-efficient products, big data and mobile Internet.

It also cites information technology as a desired growth area at home.

The Chinese IT sector has been at the center of a cybersecurity dispute between Beijing officials and an international coalition of governments and businesses.

To boost demand for domestic IT products, China is considering a slate of counterterrorism, national security and banking tech rules that would place restrictions on foreign firms operating in China or providing IT to Chinese companies.

Essentially, the rules would require these tech companies to use Beijing-approved encryption and submit their source code to officials for inspection. The banking tech rules — which have been temporarily paused over concerns from foreign governments — would also place limits on local banks’ use of foreign IT products.

Officials from numerous governments, including the U.S., are warning these cybersecurity rules will backfire, hampering domestic IT production.

Not only will foreign firms pull out of the country, global demand for Chinese IT products will precipitously drop, U.S. officials argue.

Commerce Secretary Penny Pritzker and Treasury Secretary Jack Lew have traveled to Beijing to make their case. They succeeded in getting the banking tech rules halted for now.

President Obama has raised the issue directly to Chinese President Xi Jinping.

“Those kinds of restrictive practices I think would ironically hurt the Chinese economy over the long term because I don’t think there is any U.S. or European firm, any international firm, that could credibly get away with that wholesale turning over of data, personal data, over to a government,” Obama told Reuters in March.