China has extended its vague state secrets law to the Internet, ordering companies to register software used to transmit sensitive data and threatening punishment for any government secrets sent onto the Web.
The regulations, announced Wednesday, could scare off foreign firms eager to tap China's booming Internet market. They also underscore the communist leadership's ambivalent desire to exploit the Internet for business while constricting information considered threatening to its rule.
Everyone, from Internet sites to chat-room users, must gain approval from agencies protecting government secrets before publishing previously unreleased information on the Web, according to the States Secrecy Bureau regulations released in the People's Daily.
"It's like saying you want to develop railroads and then throwing down a different gauge track not used anywhere else in the world," said William Soileau, an information technology lawyer with Denton Hall in Beijing.
Perhaps most chilling for business are regulations requiring companies and individuals to register with the government, by Monday, all software used to protect transfers of sensitive information. They require companies to hand over the serial numbers and list the employees using the software, possibly making it easier for the government to track use.
So-called encryption software is used to prevent prying into everything from electronic mail to banking settlements. Popular products like Netscape Web browsers contain encryption software, as do some Microsoft products.
China passed the regulations quietly in October. But the foreign business community became alarmed when the commission published a follow-up directive in November.
That order said that foreign companies wishing to sell products using encryption software -- such as programs that operate Web sites -- would have to submit the source code, or software blueprints. Software deemed unacceptable would have to be replaced with Chinese encryption software.
"This can potentially compromise the trade secrets of companies," said Jay Hu of the United States Information Technology Office, an industry lobbying group.
The clampdown also highlights government fears about the use of encrypted communications by political dissidents and the banned Falun Gong spiritual movement. Falun Gong followers have used e-mail and the Internet to meet and hold protests in defiance of a six-month ban.
Chinese Web sites have displayed a liveliness unfound in the traditional and wholly state-controlled media. In recent months, Web sites have carried reports on tests of a new submarine-launched missile and a wide-ranging corruption scandal that has threatened to ensnare a senior party leader -- both unreported by official media.
That lack of restraint comes despite repeated government regulations meant to bring the Internet under control. China has set up a special polic force to monitor the Internet and, in criminal trials, has accused political dissidents and leaders of Falun Gong of disseminating anti-government views and state secrets on the Web.
Still, Internet use soars. Official media reported that in the last six months of 1999, users more than doubled from 4 million to 8.9 million.
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