Washington has warned that US and other foreign companies in China could face penalties from Chinese authorities for regular business activities under a counterespionage law that went into effect yesterday.
Chinese lawmakers this year passed a wide-ranging update to Beijing’s anti-espionage legislation, banning the transfer of any information related to national security and broadening the definition of spying.
China this year has also cracked down on US consultancy and due diligence firms, a move business lobbies have said unnerved foreign investors in the world’s second-largest economy.
Photo: AFP
The US government, analysts and lawyers say that the revisions are vague and would give authorities more leeway in implementing already opaque national security legislation.
The US National Counterintelligence and Security Center said in a bulletin issued on Friday that China viewed 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 US firms in China,” it said.
“US 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.
The ambiguities of the law meant that “any documents, data, materials or items” could be deemed relevant to Chinese national security, also putting journalists, academics and researchers at risk, it said.
China’s embassy in Washington said that Beijing had a right to safeguard national security through domestic legislation.
“China will continue to promote high-level opening-up and provide a more law-based and international business environment for companies from all countries, including the United States,” embassy spokesman Liu Pengyu (劉鵬宇) said.
Experts have warned that the changes could sweep up those with even tenuous links to organizations 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 Co 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,” said Jeremy Daum, senior research fellow at Yale’s Paul Tsai China Center.
Its vague definition of espionage and national security gives authorities a wider berth, and would likely have a “chilling effect on Chinese citizens who have contact with foreigners and foreign organizations,” Daum said.
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,” US-China Business Council president Craig Allen wrote in a recent blog post.
“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,” Allen added.
The US Department of State on Friday updated its travel advisory for China, upgrading the “risk of wrongful detentions” among its warnings for Americans to reconsider travel to the country.
US Ambassador to China Nicholas Burns has said that Beijing’s targeting of US firms was politically motivated and that Washington would push back.
Additional reporting by AFP
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