A senior US official welcomed the move which he said was a good sign for Western businesses that saw the rule as a major impediment to working in the world’s second largest economy.
President Barack Obama said in an interview with Reuters on March 2 that he had raised concerns about the law directly with Chinese President Xi Jinping.
White House Cybersecurity Coordinator Michael Daniel said the Chinese have decided to suspend the third reading of that particular law, which has put the law on hiatus.
“We did see that as something that was bad not just for U.S. business but for the global economy as a whole, and it was something we felt was very important to communicate very clearly to them,” Daniel said.
The law would require technology firms to hand over encryption keys, the passcodes that help protect data, and install security “backdoors” in their systems to give Chinese authorities surveillance access.
The move has given companies “some breathing room, but not complete relief” because the bill could be picked up again at any point.
The thought is that the Chinese are not ready to kick out all foreign companies, and because they weren’t ready to take that step, they backed off.
The initial draft, published by the NPC late last year, requires companies to also keep servers and user data within China, supply law enforcement authorities with communications records and censor terrorism-related Internet content.
Although the law would apply to both domestic and foreign companies, officials in Washington and Western business lobbies complained that the combination of that law, the banking rules and anti-trust investigations amounted to unfair regulatory pressure targeting foreign companies.