Operating in China is becoming more uncertain and even risky for companies, which are being asked to abide by vague national security rules even as Beijing touts its reopening after the Covid hiatus.
Uncertainty over anti-espionage rules
The recent amendments to the anti-espionage law, which will take effect on July 1, will broaden the concept of espionage and prohibit the transfer of information related to national security outside China’s borders.
A vague situation that worries Chinese and foreign companies present in China, who ask themselves the same question: how to know now what is allowed or prohibited?
“Nobody knows if he crossed a red line or not. Or where that red line is.”
Mintz Group offices closed; five employees arrested
A red line, the American auditing company Mintz Group crossed one: in March, the police closed its offices in Beijing and arrested five members of its staff.
The following month, US management and strategy consulting giant Bain & Company said authorities had questioned the employees in Shanghai.
A new red flag came last week from a 15-minute report by state broadcaster CCTV about Capvision, which runs China’s largest network think tank.
Authorities explained there that the raids on several company offices were part of a broader campaign to reorganize the consulting industry.
These events “send a worrying signal and reinforce the uncertainty felt by foreign companies present in China,” the European Union Chamber of Commerce in Shanghai told AFP.
“Recent events are not likely to restore confidence or attract foreign investment,” he said.
A pressure that is not new
It’s all about priorities, says Jeremy Daum of Yale University Law School in the United States.
“China believes that there are legitimate threats to its national security and priority will always be given to countering these threats, rather than anything else,” he said.
Lester Ross, a Beijing-based lawyer, said state security agencies have long been pushing for stricter scrutiny of sectors that collect large amounts of data.
And what consequences with the anti-espionage law? It’s hard to say, because the initial definition of espionage was already so broad that “the impact of its expanded definition is not immediately clear,” Jeremy Daum said.
This vagueness “sometimes makes it difficult for companies to fully assess the risk,” which “inevitably leads” to “a chilling effect” on them, he told AFP.
“Companies have to be much more careful with the collection of information” and its sources, summarizes Lester Ross.
According to Bloomberg, the government has also asked public companies to phase out their contracts with the big four accounting firms (Deloitte, KPMG, EY and PwC).
This dissonance between recent events and the government’s ambition to attract foreign capital has increased the sense of uncertainty.
Source: BFM TV
