I live in China (on and off for 13 years). I have run tech companies here. First up, rules are less fixed here, so the fact this has been announced doesn't mean it will be encountered/enforced at all outside of very large government contracts (banks here are owned by .gov, foreign banks are excluded despite WTO-join-time assurances to the contrary). Secondly, this is a direct response to the NSA paper revelations about how much success they've had infiltrating Chinese communications networks... big red dots showing points of NSA infrastructure inside the country! Well... pot, kettle, black. Finally, if you are selling physical or software products to China and feel they're somehow unique technically and believed for a second that they wouldn't be reverse engineered by interested parties, then you were already kidding yourself.