China's Ambiguous Anti-Espionage Law Is The New Headache For Foreign Companies

On Friday, 30 June, the United States issued a warning regarding a newly enacted Chinese counterespionage law, expressing concerns that American and other foreign companies operating in China could face penalties from Chinese authorities for their regular business activities, as reported by Nikkei Asia.

The Chinese government recently passed an extensive update to its anti-espionage legislation, which will come into effect on 1 July. The updated law prohibits the transfer of any information related to national security and broadens the definition of spying.

This year, China has also taken actions against American consultancy and due diligence firms, which has caused unease among foreign investors in the world's second-largest economy, as reported by business lobbies.

The US National Counterintelligence and Security Center (NCSC) issued a bulletin stating that China perceives the outflow of data as a national security risk.

It highlighted that the new and existing laws could compel Chinese employees of foreign companies to assist Chinese intelligence efforts.

According to the NCSC, these laws grant the Chinese government broader legal grounds to access and control data held by US firms in China.

The NCSC also pointed out that the vagueness of the law leaves room for anything, including documents, data, materials, or items, to be considered relevant to Chinese national security. This ambiguity puts journalists, academics, and researchers at risk as well.

In response, the Chinese Embassy in Washington stated that Beijing has the right to protect national security through domestic legislation.

The embassy spokesman emphasised China's commitment to opening up to overseas investment and providing a law-based and international business environment for companies from all countries, including the United States.

Chinese President Xi Jinping has placed significant emphasis on national security since assuming office in 2012. As the rivalry between the United States and China has intensified, suspicion of the US and its allies has grown in China. Nevertheless, Beijing maintains that it is opening up to foreign investment.

In light of these developments, the US State Department updated its travel advisory for China on Friday (30 June), highlighting the increased "risk of wrongful detentions" among its warnings for American citizens considering travel to the country.

US Ambassador to China Nicholas Burns has characterised Beijing's targeting of US companies as politically motivated and has indicated that Washington will respond accordingly.