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(Repeating story first sent on Saturday)* Apple to store keys for iCloud outside U.S. for first time* Chinese user data will be accessible via Chinese legalprocess* Advocates say move is major downgrade for Chinese userprivacy* Apple says almost all Chinese iCloud users agree to change* Apple says there will be no "backdoor" for ChineseauthoritiesBy Stephen Nellis and Cate CadellSAN FRANCISCO/BEIJING Feb 24 (Reuters) - When Apple Incbegins hosting Chinese users' iCloud accounts in a newChinese data center at the end of this month to comply with newlaws there, Chinese authorities will have far easier access totext messages, email and other data stored in the cloud.That’s because of a change to how the company handles thecryptographic keys needed to unlock an iCloud account. Untilnow, such keys have always been stored in the United States,meaning that any government or law enforcement authority seekingaccess to a Chinese iCloud account needed to go through the U.S.legal system.Now, according to Apple, for the first time the company willstore the keys for Chinese iCloud accounts in China itself. Thatmeans Chinese authorities will no longer have to use the U.S.courts to seek information on iCloud users and can instead usetheir own legal system to ask Apple to hand over iCloud data forChinese users, legal experts said.Human rights activists say they fear the authorities coulduse that power to track down dissidents, citing cases from morethan a decade ago in which Yahoo Inc handed over user data thatled to arrests and prison sentences for two democracyadvocates. Jing Zhao, a human rights activist and Appleshareholder, said he could envisage worse human rights issuesarising from Apple handing over iCloud data than occurred in theYahoo case.In a statement, Apple said it had to comply with recentlyintroduced Chinese laws that require cloud services offered toChinese citizens be operated by Chinese companies and that thedata be stored in China. It said that while the company’s valuesdon’t change in different parts of the world, it is subject toeach country’s laws.“While we advocated against iCloud being subject to theselaws, we were ultimately unsuccessful,” it said. Apple said itdecided it was better to offer iCloud under the new systembecause discontinuing it would lead to a bad user experience andactually lead to less data privacy and security for its Chinesecustomers.As a result, Apple has established a data center for Chineseusers in a contractual arrangement with state-owned firm Guizhou- Cloud Big Data Industry Co Ltd. The firm was set up and fundedby the provincial government in the relatively poor southwesternChinese province of Guizhou in 2014. The Guizhou company hasclose ties to the Chinese government and the Chinese CommunistParty.The Apple decision highlights a difficult reality for manyU.S. technology companies operating in China. If they don’taccept demands to partner with Chinese companies and store datain China then they risk losing access to the lucrative Chinesemarket, despite fears about trade secret theft and the rights ofChinese customers.BROAD POWERSApple says the joint venture does not mean that China hasany kind of "backdoor" into user data and that Apple alone – notits Chinese partner – will control the encryption keys. ButChinese customers will notice some differences from the start:their iCloud accounts will now be co-branded with the name ofthe local partner, a first for Apple.And even though Chinese iPhones will retain the securityfeatures that can make it all but impossible for anyone, evenApple, to get access to the phone itself, that will not apply tothe iCloud accounts. Any information in the iCloud account couldbe accessible to Chinese authorities who can present Apple witha legal order.Apple said it will only respond to valid legal requests inChina, but China's domestic legal process is very different thanthat in the U.S., lacking anything quite like an American"warrant" reviewed by an independent court, Chinese legalexperts said. Court approval isn’t required under Chinese lawand police can issue and execute warrants.“Even very early in a criminal investigation, police havebroad powers to collect evidence,” said Jeremy Daum, an attorneyand research fellow at Yale Law School’s Paul Tsai China Centerin Beijing. “(They are) authorized by internal police proceduresrather than independent court review, and the public has anobligation to cooperate.”Guizhou - Cloud Big Data and China’s cyber and industryregulators did not immediately respond to requests for comment.The Guizhou provincial government said it had no specificcomment.There are few penalties for breaking what rules do existaround obtaining warrants in China. And while China does havedata privacy laws, there are broad exceptions when authoritiesinvestigate criminal acts, which can include underminingcommunist values, “picking quarrels” online, or even using avirtual private network to browse the Internet privately.Apple says the cryptographic keys stored in China will bespecific to the data of Chinese customers, meaning Chineseauthorities can't ask Apple to use them to decrypt data in othercountries like the United States.Privacy lawyers say the changes represent a big downgrade inprotections for Chinese customers."The U.S. standard, when it's a warrant and when it'sproperly executed, is the most privacy-protecting standard,"said Camille Fischer of the Electronic Frontier Foundation.WARNED CUSTOMERSApple has given its Chinese users notifications about theFeb. 28 switchover to the Chinese data center in the form ofemailed warnings and so-called push alerts, reminding users thatthey can choose to opt out of iCloud and store informationsolely on their device. The change only affects users who setChina as their country on Apple devices and doesn’t affect userswho select Hong Kong, Macau or Taiwan.Apple doesn't require an iCloud account to set up and use aniPhone. But if the user enables iCloud during set up, thedefault settings on the iPhone will automatically create aniCloud back-up. Apple declined to comment on whether it wouldchange its default settings to make iCloud an opt-in service,rather than opt-out, for Chinese users.Apple said it will not switch customers’ accounts to theChinese data center until they agree to new terms of service andthat more than 99.9 percent of current users have already doneso.Until now, Apple appears to have handed over very littledata about Chinese users. From mid-2013 to mid-2017, Apple saidit did not give customer account content to Chinese authorities,despite having received 176 requests, according to transparencyreports published by the company. By contrast, Apple has giventhe United States customer account content in response to 2,366out of 8,475 government requests.Those figures are from before the Chinese cyber securitylaws took effect and also don't include special nationalsecurity requests in which U.S. officials might have requesteddata about Chinese nationals. Apple, along with other companies,is prevented by law from disclosing the targets of thoserequests.Apple said requests for data from the new Chinese datacenterwill be reflected in its transparency reports and that it won’trespond to “bulk” data requests.Human rights activists say they are also concerned aboutsuch a close relationship with a state-controlled entity likeGuizhou-Cloud Big Data.Sharon Hom, executive director of Human Rights in China,said the Chinese Communist Party could also pressure Applethrough a committee of members it will have within the company.These committees have been pushing for more influence overdecision making within foreign-invested companies in the pastcouple of years.(Reporting by Stephen NellisEditing by Jonathan Weber andMartin Howell)
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