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US Joins with EU, Japan Against China's Vendor Source Code Plan

China is going through with a plan to force foreign technology vendors that supply Chinese banks to fork over intellectual property like proprietary source code and adopt Chinese encryption algorithms. But the U.S. said that it wouldn’t back down on pressuring the nation to go in a different direction.

The United States has joined forces with Japan and the European Union in a fresh effort to lean on the country.

According to Reuters, Deputy Trade Representative Robert Holleyman said that the group is asking for a hold on the measures until more talks could be held.

"We are working to try to break down those barriers, and we have also secured support from our allies and trade partners in Japan and the EU," Holleyman told the National Lieutenant Governors Association this week. "This is not just a US-led initiative; it's an important global initiative."

The plans, which surfaced in January, are underway in terms of implementation—the banks had a deadline of last weekend to file their plans for compliance with the Chinese government. Holleyman noted that most tech companies, if not all, in the US would decline to conform to the requirements, and would thus be shut out of China’s large and lucrative financial vertical.

It also spells issues for China’s own technology base.

"What we have been doing very successfully (is) to make clear towards the United States government, the European government, the Japanese government (and) the government of China that this is a concern," said Victoria Espinel, president of industry group BSA The Software Alliance. "It is not good for Chinese companies to be cut off from being able to choose the best products and services they want, it's not good for China ... as an economy."

The EU also plans to bring up the issue with Beijing at the ministerial level and at the upcoming World Trade Organization meeting on technical trade barriers.

“The EU is concerned by the lack of transparency in the development of these measures and by the potential impact on EU companies," a European Commission spokesperson told Reuters.

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