With President of China Xi Jinping on February 28, 2024, signing a new state secrets law, making the existing law even more stringent, and broadening the scope of the type of information that will be considered a national security risk, China is becoming for foreign investors not only a difficult place to do business but also a dangerous place to be in.
The amendments to the state secrets law adopted by the National People’s Congress Standing Committee, the top legislative body of China, on February 27 will see the Law on Safeguarding State Secrets take effect from May 1; now that President Xi has signed an executive order. The amendments have incorporated in the existing state secrets law a new concept called “work secrets.” It is a nebulous concept which has been defined as information that is not an official state secret “but will cause certain adverse effects if leaked.”
All government departments and state-owned enterprises will be required under the law to “determine the confidentiality level” of the state secrets they work with, and implement new rules about managing a “declassification” period for employees who leave their posts; including ban on overseas travel and new employment. “During the declassification period, personnel who have access to secrets are not allowed to work or leave the country. Nor are they allowed to disclose state secrets in any way,” Radio Free Asia has reported, quoting the China Central Television; the national television broadcaster of China.
The measures don’t just apply to state secrets; they will also apply to “work secrets,” according to Article 64 of the new legislation. Expert on Chinese law Jeremy L. Daum has said “work secrets” refer to “information produced or collected by departments in the performance of their duties, the leaking of which will cause an adverse impact.” He has said work secrets and internal documents are not new issues but it is unfortunate the way these concepts have been further enshrined in law. The clause in the new legislation could lead to “overzealous identification” of work secrets, leading to increased risk for workers and decreased transparency for the common people.
Chief Economist Diana Choyleva at the London-based Enodo Economist, a research firm focussed on China, has been quoted as saying: “The law is vague and the definition of state secret so broad that it could include anything that the party-state decides it should. It will further complicate life for foreign firms and their employees based in China.”
President of European Union Chamber of Commerce in China Jens Eskelund has observed: “The scope of issues deemed ‘sensitive’ seems to be constantly expanding, which makes it more difficult for companies to access information necessary for making investment decisions related to their China operations.”
Experts say under the new state secrets law, “state secret” and “work secret” have been made synonymous with the political security of the communist regime. Revealing for a wider audience any data or piece of information that potentially embarrasses the ruling Chinese Communist Party is being dubbed as a risk for the security of the state and a punishable offence.
Professor of Politics at New York’s City University Xia Ming says the new law could have an impact on foreign companies wanting to carry out market research in China.”The first thing any company that wants to invest in China does is to carry out market research on China,” Xia says. “But all kinds of data are regarded as confidential in China, because they touch on the political security of the regime. They think people could interpret specific and minor fluctuations in the data to create information that is unfavourable to the political system and the stability of the regime. So everything is confidential.” The new security law would also have a major impact on internet service providers who would be required to cooperate with the authorities in the investigation of any case involving the leak of unauthorized information online.
Chinese economist Li Hengqing based in the U.S. says business confidence has already suffered in China from raids on consultancy firms carried out in 2023. The raid on offices of the New York-headquartered Capvision Partners in Beijing, Shanghai and Shenzhen in May 2023 under the pretext of protection of national security had raised global concern. Employees were questioned and office devices searched. Capvision was engaged in carrying out due diligence firms needed before making any investment decision. “Everyone is definitely feeling the chill now,” Li has said. “The more Beijing does this, the more foreign business and entrepreneurs will be discouraged from investing in China.”
Li says the new security law in China runs counter to recent claims from the central Committee of the ruling Chinese Communist Party that the Chinese economy is being expanded to accommodate more global participation. Discriminatory policies against foreign investors will take them in the complete opposite direction.
For Beijing, all sensitive information must now adhere to the overall concept of national security, say analysts. Li Hengqing says this means any area that can undermine the grip of President Xi Jinping on power is of national security interest. “It is all about the stability of the regime. Xi Jinping does not really care about the livelihood of the people or the economic development of the country.”
There is nothing surprising, however, about this. As Radio Free Asia has reported, Xi Jinping had once said: “What is the point of economic development if we neglect the stability of the regime?” In Xi’s China, thus, the welfare of the party comes first. The welfare of the people of China comes later.
Lately, China has also broadened the scope of its Counterespionage Law. “The law which bans the transfer of unspecified information related to national security and interests has alarmed the United States that foreign companies in China could be punished for regular business activities,” said a Reuters report from Beijing on August 1, 2023.
The U.S. apprehension had a sound basis. In March 2023, an employee of Japanese pharmaceutical company Astellas Pharma was detained on the suspicion of “spying” and formally arrested in October. Foreign Minister of Japan Yoshimasa Hayashi had lodged a protest against the arbitrary arrest. The details of how he had violated the counterespionage law and criminal code in China remains unknown, says a Japan Times report.
Since the coming into force of the Counterespionage Law in China in 2014, as many as 17 Japanese nationals have been detained for alleged spying activities. In March 2023, Chinese nationals working in American due-diligence firm Mintz Group were detained in a raid on its Beijing office. In April 2023, employees of consultancy firm Bain& Co were questioned by Chinese authorities. A Financial Times report says Dentons, a law firm with offices around the world, has decided to hive off its mainland China arm. “The move comes after the Chinese government has broadened the scope of cyber security and data protection laws on national security grounds,” says the FT report.
“The People’s Republic of China is one of the most secretive societies in the world,” the Cornell International Law Journal has commented. “Information is revealed and shared on the strictest need-to-know basis. This is true between fellow Chinese — even close friends and relatives — and especially when “foreign elements” are involved.”
In China, legal provisions to protect state secrets are as old as 1951 when the Provisional Regulations for Preservation of State Secrets was promulgated. The regulations contained no definition of “state secrets” but a long list of peculiar examples which virtually encompassed any imaginable piece of information, writes the Cornell Journal. The list even included “secret matters concerning meteorological forecasts.” The consequences of such a law were disastrous. A Chinese staff member in Shell International Petroleum had been held for six and half years in solitary confinement for having written to a foreigner about the size of grain supply to Shanghai for a year. Harvard educated lawyer in Hong Kong Hanson Huang had been imprisoned for 15 years for passing “unspecified state secrets to unidentified foreigners.”
For foreigners attempting to negotiate business projects with Chinese enterprises since China opened its doors to foreign investment in 1979, the difficulties of getting hold of legal, economic and other relevant information from their Chinese counterparts and government agencies were among the greatest frustrations.
With the new State Secrets Law passed in 1989 replacing the Regulations of 1951, things had improved a lot. But now under the rule of President Xi Jinping China seems to have taken a Great Leap Backward to the days of all-pervasive secrecy.