Treasury Secretary Lew Urges China Tech Policy Reform

Treasury Secretary Jack Lew said on Monday he would discuss with the Chinese government recent technology policy moves that Washington has complained constitute unfair regulatory pressure on foreign firms.

China said earlier this month work was ongoing on a draft anti-terrorism law that would require foreign companies to hand over encryption keys and otherwise facilitate Beijing's ability to bypass security measures, despite U.S. protests.

"We have already made clear our concerns regarding forced technology transfer and other attempts to bar technological competition, most recently in the banking sector, and I look forward to further discussion today," Lew said, in remarks made during a meeting with Vice Premier Wang Yang in Beijing.

President Barack Obama said he had raised the issue directly with China's President Xi Jinping, but Beijing denied U.S. statements that the law had then been put on hold.

The policy, while applied to both domestic and foreign firms, is seen largely benefiting domestic players, and foreign software firms in particular risk sacrificing sales in other markets if it becomes known that they have given Beijing back door access to their code.

Another regulation from China restricts the kinds of computers purchased by the Chinese banking industry to ensure that they meet "security and controllability" requirements, seen as a way of effectively forcing Chinese banks to buy "indigenous" software applications.

The U.S. government has complained of ongoing industrial espionage by Chinese firms against its companies, saying it is often backed by government agencies including the Chinese military. Beijing denies the allegations.

Lew also said that the U.S. supported China's efforts to transform its economy towards relying more on domestic demand, and looked forward to China deepening its financial reforms, in particular in its management of the exchange rate.

"It is critical that China continues to move towards a market-determined exchange rate and a more transparent exchange rate policy," he said.

The meeting comes as the two sides prepare for the upcoming bilateral Strategic and Economic Dialogue (S&ED), and vice premier Wang referred to Xi's scheduled visit to the United States.

"I am looking forward to having a candid exchange of views with you on these issues so that when President Xi Jinping visits the United States in (the) autumn we will have a bumper harvest of China-U.S. relations," Wang said.

Lew is scheduled to meet Premier Li Keqiang later on Monday.

(Reporting by Kevin Yao, and by Pete Sweeney in SHANGHAI; Editing by Nicholas Heath, Richard Borsuk and Mike Collett-White)