China clamping down on use of VPNs to evade 'Great Firewall'

BEIJING -- China is tightening control over foreign companies' internet use in a move some worry might disrupt their operations or jeopardize trade secrets as part of a crackdown on technology that allows web surfers to evade Beijing's online censorship.

In a letter to corporate customers seen by The Associated Press, the biggest Chinese internet service provider said virtual private networks, which create encrypted links between computers and can be used to see sites blocked by Beijing's web filters, will be permitted only to connect to a company's headquarters abroad.

The letter from state-owned China Telecom Ltd. stated VPN users are barred from linking to other sites outside China, a change that might block access to news, social media or business services obscured by its "Great Firewall."

The letter repeats an announcement from January that only VPNs approved by Chinese authorities are allowed.

That has prompted fears of possible loss of trade secrets or information about customers or employees among companies that question the reliability of Chinese encryption services and whether authorities might read messages.

Regulators announced a crackdown in January to stamp out use of VPNs to circumvent web censorship.

Authorities have tried to reassure companies they won't be affected, but if the rules in the China Telecom letter are enforced, they could hamper activity ranging from gathering information for business deals to employees working on business trips.

The crackdown reflects President Xi Jinping's vision of "internet sovereignty," or Beijing's absolute right to control what people can do and see online.

Control over information is especially sensitive ahead of a party congress late this year at which Xi is due to be appointed to a second five-year term as leader.

The ruling Communist Party encourages web use for business and education but rejects the notion of a borderless internet and the free flow of information.

It controls internet traffic across China's borders and tries to keep its public from seeing thousands of websites abroad, including Google and social media such as Facebook, Twitter and YouTube, as well as news outlets and human-rights groups.

This week, the Beijing municipal internet regulator announced it ordered website operators including Baidu Inc. and Tencent Holdings Ltd. to remove material that was "distorting the history of China and the Party" and "promoting abnormal values" or had other problems.

Also this week, a letter issued by the Waldorf Astoria Hotel in Beijing to guests that circulated on social media stated the hotel no longer could provide VPN service "due to legal issues" as of July 14.

In June, the Hong Kong-based operator of a popular service, Green VPN, announced Chinese regulators had ordered it to close.

Beijing repeatedly has pressured foreign companies to hand over technology, encryption know-how and other trade secrets in exchange for access to its huge and growing market.

Companies cite internet controls as among the biggest obstacles to doing business in China.

In a survey by the American Chamber of Commerce in China last year, 79 percent of companies that responded said web filters hurt them by blocking access to information and business tools.

U.S. President Donald Trump said in April he would set aside disputes with Beijing over market barriers and currency temporarily while the two sides cooperated over North Korea's nuclear program. But Trump has expressed frustration with lack of progress on that and has resumed criticizing China's trade surplus with the United States.

It was unclear how many companies received China Telecom's letter. The American and European chambers of commerce in Beijing said their members had not reported receiving it.