China’s New Anti-Espionage Law Poses Risks for Foreign Businesses

China’s New Anti-Espionage Law Poses Risks for Foreign Businesses
Chinese police detain a journalist at a checkpoint on the road to the riot-affected Uyghur town of Lukqun, Xinjiang region, on June 28, 2013. (Mark Ralston/AFP via Getty Images)
Antonio Graceffo

Under the Chinese Communist Party’s (CCP) new anti-spying law, normal business activities may be considered spying, resulting in foreigners being banned from entering or exiting China.

China’s revised Counter-Espionage Law, which went into effect on July 1, prohibits the transfer of information related to national security while also expanding the definition of national security. Additionally, the law broadens the scope of what constitutes spying.

Spying can now include “organizations or individuals [that] collude, to steal, pry into, state secrets, intelligence, and other documents, data, materials.” While the definition of spying in most countries would apply to attempts to steal state secrets, prying into state secrets would generally not be a crime. This type of broad and ambiguous language is concerning for Westerners who might assume it is acceptable to ask sensitive questions. Now, merely asking appears to be illegal. This imperils everyone from foreign journalists to auditors.

The law purports to protect national security interests, but the definition could extend to any information related to documents, data, and materials related to state organs and infrastructure. The law also empowers investigators to access data, electronic equipment, and information on personal computers and phones. Investigators would also have the authority to prevent people under investigation from leaving the country.

Jeremy Daum, senior research fellow at Yale’s Paul Tsai China Center, told AFP that the revised law uses a “whole-of-society approach to dealing with anything that is a risk to this broad definition of national security,” enlisting private companies and persons as agents for the CCP. Article 7 of the law states, “Citizens of the People’s Republic of China have an obligation to preserve the nation’s security, honor, and interests,” while Article 8 reads, “All citizens and organizations shall support and assist counter-espionage efforts.”
This whole-of-society approach is consistent with Article 7 of the National Intelligence Law (as amended in 2018). It stipulates, “All organizations and citizens shall support, assist, and cooperate with national intelligence efforts.” Article 24 of the law states that, in addition to public security and civil affairs, sectors expected to aid in intelligence-gathering include “civil affairs, finance, health, education, human resources and social security, veterans affairs, and healthcare security, as well as state-owned enterprises and public institutions.” It is important to note that the law does not say that these intelligence-gathering responsibilities are limited to China’s borders. Effectively, the two laws make all Chinese companies and individuals agents of the CCP.
The Counter-Espionage Law places Chinese citizens working for foreign companies in a particular predicament, as they could be convicted of “Activities carried out, instigated or funded by foreign institutions, organizations, and individuals other than espionage organizations and their representatives, or in which domestic institutions, organizations or individuals collude.” The CCP’s repression of Christianity has often been justified as preventing citizens from colluding with foreign entities. But the wording of the revised law could be applied to any Chinese national working in a foreign company or working as a local representative of a foreign company.
Christians pray during a mass at a church in Xining, Qinghai Province, northwest China, on July 3, 2005. China officially sanctions five religious groups: Protestantism, Catholic Christianity, Islam, Buddhism, and Taoism. Chinese are allowed to worship only in state-sanctioned churches and temples. (China Photos/Getty Images)
Christians pray during a mass at a church in Xining, Qinghai Province, northwest China, on July 3, 2005. China officially sanctions five religious groups: Protestantism, Catholic Christianity, Islam, Buddhism, and Taoism. Chinese are allowed to worship only in state-sanctioned churches and temples. (China Photos/Getty Images)
The revised Counter-Espionage Law states that it applies to foreigners and that violators can be deported. The law goes on to say that foreigners considered to have violated the law may also be banned from entering the country. Barring entry suggests an extraterritorial dimension to the law, as the violation may have occurred while the person was in another country. However, a potential “exit ban” on foreign nationals is even more concerning. Article 33 states that state security organs “at the provincial level or above may notify the immigration management bodies not to allow persons suspected of acts of espionage to exit the country.”
In April, Chinese police launched an investigation into the activities of U.S. management consulting firm Bain & Company. Weeks earlier, the Beijing office of U.S. due diligence firm Mintz Group was raided and shut down, raising fears that the normal operations of management consulting companies could run contrary to the revised Counter-Espionage Law, as they involve asking sensitive questions and obtaining data and information. The revised law could also be exploited as a pretext for the CCP to gain access to a company’s trade secrets or proprietary data or information about clients.
Commenting on the revised law, the U.S. National Counterintelligence and Security Center (NCSC) issued a warning to Americans and American companies in China: “These laws provide the PRC [People’s Republic of China] government with expanded legal grounds for accessing and controlling data held by U.S. firms in China. U.S. companies and individuals in China could also face penalties for traditional business activities that Beijing deems acts of espionage or for actions that Beijing believes assist foreign sanctions against China. The laws may also compel locally-employed PRC nationals of U.S. firms to assist in PRC intelligence efforts.”
Among the activities the NCSC warned about were handling personal data, both inside or outside of China, as well as gathering and retaining personal data. On June 30, the State Department cautioned Americans to reconsider travel to China, Hong Kong, or Macau “due to the arbitrary enforcement of local laws, including in relation to exit bans, and the risk of wrongful detentions.”
Over the past three years, foreign companies have found China a less attractive place to do business. The new law is just the latest reason for companies to leave China. According to the European Union Chamber of Commerce, business confidence in China is at an all-time low, driving companies to shift investment away from China in record numbers. One in 10 of the European Chamber’s member companies have already shifted investment out of China, while one in five are considering relocating their investment elsewhere.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Antonio Graceffo, PhD, is a China economic analyst who has spent more than 20 years in Asia. Mr. Graceffo is a graduate of the Shanghai University of Sport, holds a China-MBA from Shanghai Jiaotong University, and currently studies national defense at American Military University. He is the author of “Beyond the Belt and Road: China’s Global Economic Expansion” (2019).
Related Topics