China has approved revisions to its counterespionage law, which could affect foreigners doing business in the country, as they will be subjected to increased scrutiny by authorities. The revised law, first enacted in 2014, will take effect on July 1.
The updated legislation expands the original text to include the illegal buying or providing of documents, data, materials, or items related to national security, as well as the unauthorized provision of state secrets. The draft also targets cyberattacks against state bodies or critical infrastructure by espionage organizations and their agents, while aiming to crack down on leaking information on system vulnerabilities.
The revisions will expand state security forces' powers, allowing them to forcibly search individuals' belongings and electronic devices suspected of involvement in spying. Authorities can also ban Chinese citizens deemed a national security risk from leaving the country or foreign nationals from entering. Additionally, Chinese citizens are required to report any acts of espionage, and transportation and telecommunications companies must provide technical support for anti-spying efforts.
The lack of a clear definition of China's national security or interests has left foreign individuals and businesses concerned about the law's potential impact on them. Foreign businesses operating in China may face increased scrutiny and restrictions under the new anti-spying law. The expanded powers of state security forces could lead to more inspections and seizures of electronic devices, potentially compromising confidential business information.
The vague definition of China's national security or interests may leave foreign businesses vulnerable to espionage accusations or activities considered harmful to national security. The law may create a more challenging business environment for foreign companies in China.
The requirement for transportation and telecommunications companies to provide technical support for anti-spying efforts could place an additional burden on foreign firms that already face challenges navigating China's regulatory environment. This provision may require them to share proprietary information or implement costly measures negatively impacting their bottom line.
The increased focus on counterespionage activities under this new law is part of a broader trend towards greater state control over business operations in China. Foreign firms have faced increasing pressure from Chinese regulators regarding data privacy concerns, intellectual property rights violations, and compliance with local laws.
While the anti-spying law's intention is understandable amid growing global concerns around cybersecurity threats, the enforcement of these regulations against foreign entities operating within China remains unclear. Consequently, the updated law poses yet another challenge for businesses seeking opportunities in Asia's largest markets, potentially leading to significant operational and reputational risks.
