China’s new anti-espionage law comes into effect amid business worries

A revised law drastically broadening China’s definition of espionage came into effect, giving Beijing more power than ever to penalise what it considers risks to national security.

According to the US government, analysts and lawyers the modifications to Beijing’s anti-espionage law are ambiguous and will allow authorities more latitude in enforcing existing ambiguous national security legislation.

The amendments, which were initially made available for public comment in December 2022, were formally approved by China’s top legislative body in April.

Chinese law already imposes heavy penalties for people accused of espionage, ranging from life in jail to execution in extreme circumstances.

In May, a 78-year-old US citizen was sentenced to life in prison on spying charges.

China this year has also cracked down on U.S. consultancy and due diligence firms, move business lobbies have said unnerved foreign investors in the world’s second-largest economy.

The U.S. National Counterintelligence and Security Center (NCSC) said in a bulletin that China viewed the outbound flow of data as a national security risk and that the new and existing laws could compel companies’ locally employed Chinese nationals to assist in Chinese intelligence efforts.

“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,” the NCSC said.

“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,” it said.

Under the revised law, “relying on espionage organisations and their agents” as well as the unauthorised obtaining of “documents, data, materials, and items related to national security and interests” can constitute a spying offence.

Beijing insists it has the right to “safeguard its national security through legislation” and says it will “uphold the rule of law”.

But experts have warned that the changes could sweep up those with even tenuous links to organisations accused of spying.

They come in the face of an already tense environment for foreign businesses in China, following raids on and questioning of staff at due diligence company Mintz Group and consulting giant Bain and Company this year.

The new law embodies a “whole-of-society approach to dealing with anything that is a risk to this broad definition of national security”, Jeremy Daum, senior research fellow at Yale’s Paul Tsai China Center, told AFP.

Daum said the law builds on a broader trend of tightening control since 2014, after President Xi Jinping took power.

But its vague definition of espionage and national security gives authorities a wider berth, he added, and will likely have a “chilling effect on Chinese citizens who have contact with foreigners and foreign organisations”.

The new revisions have ruffled feathers among the business community, with companies fearing even tighter scrutiny.

The changes “have raised legitimate concerns about conducting certain routine business activities, which now risk being considered espionage”, Craig Allen, President of the US-China Business Council, wrote in a recent blog.

“Confidence in China’s market will suffer further if the law is applied frequently and without a clear, narrow and direct link to activities universally recognized as espionage,” wrote Allen.

Diplomatic officials from several countries have also sounded alarm bells ahead of the legal changes, urging citizens in China to be vigilant.

Chinese leader Xi Jinping has emphasized national security since taking office in 2012. Suspicion in China of the U.S. and its allies has grown as the U.S.-China rivalry has intensified, yet Beijing has insisted it is opening up to overseas investment.

U.S. officials have told Reuters that since the enactment of the Chinese law in April they have received a flood of questions from businesses and other groups about the risks of travelling to China.
The U.S. State Department also updated its travel advisory for China on Friday, upgrading the “risk of wrongful detentions” among its warnings for Americans to reconsider travel to the country.

With inputs from agencies

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