Multinationals and industry groups fear vague language in a new Chinese security law that calls for key sectors to be "secure and controllable" could be used to force tech companies to build backdoors, provide encryption keys or even hand over source codes.
Foreign businesses also accused Beijing of using the law to favour local business and even force them to help locals develop more advanced technology, according to the New York Times.
The final draft of the law was revealed Wednesday, suggesting a new front had opened in the clash between the U.S. and China over cyber security and technology policy. Some headway had been made in smoothing relations in between the two when earlier this year China agreed to suspend a policy restricting foreign technology in the country's banking sector. Last month both nations agreed to a cyber-security code of conduct.
However, US presidential hopeful Hilary Clinton, front-runner to be the candidate of the Democratic Party, has put pressure on the relationship by accusing China of actively hacking government and commercial organisations.
Speaking at a campaign event, she said that China was "trying to hack into everything that doesn't move in America".
China is suspect number one in the hacking of the Office of Personnel Management (OPM) in the US, according to intelligence chief James Clapper.
The China government has dismissed the claims, saying they are "irresponsible and unscientific".
An earlier version of this article appeared on SCMagazine.com.