In recent weeks, Chinese authorities have raided foreign firms, imposed exit bans, restricted databases, and expanded an espionage law. Together, these measures point to the government’s growing assertiveness in controlling information and other flows in and out of China in the name of national security. Daisuke Wakabayashi, Chris Buckley, and Keith Bradsher at The New York Times reported that these measures reflect the CCP’s drive to restrict information from foreign actors:
International consulting and advisory firms are among those that have faced questioning from Chinese security officers in recent weeks, adding to fears among foreign investors that the authorities may be trying to choke off their access to unvarnished information about markets, competitors and potential deals in China. The scrutiny has left some companies questioning whether their China operations are at risk.
Officers visited the Shanghai office of Bain & Company, a major American consulting firm, and questioned employees, Bain said in late April. And the Mintz Group, an American company specializing in corporate investigations, said in late March that officials visited its Beijing office and detained five Chinese employees.
[…] Broadly, they appear to reflect the demands from Mr. Xi and other senior leaders to fortify national security and, in particular, seal off the flow of potentially sensitive information to foreign governments and investors. Since coming to power in 2012, Mr. Xi has urged vigilance against the United States and Western influence. His wariness has redoubled as relations with Washington have deteriorated sharply under the Trump and Biden administrations. [Source]
Describing the U.S. business community’s reaction to these raids on the Sharp China Podcast, Bill Bishop said (at 12:20), “People are freaked out … This is extremely concerning for a lot of corporations.” After the Mintz Beijing office was raided, a former staff member said, “You don’t know where the red line is.” The Financial Times described how those targeted by the authorities’ “men in black” are often working in areas that the government deems sensitive, but those areas are expanding:
[A]nother person familiar with the due diligence groups said the government had now gone further and “drawn a whole web of bright red lines that you can get very easily entangled in”. US sanctions had created huge demand for vetting of supply chains. “But Beijing is telling us to not touch that business,” the person said.
[…] Two people said Beijing moved against Mintz because the company had taken some of the untapped business for Xinjiang supply chain audits. Mintz declined to comment.
Those who believed only riskier work would attract trouble were surprised by the Bain case, one investigator said. “If it can hit Bain, it can hit anyone.” [Source]
Bolstering this campaign is China’s espionage law, which was updated last week. The new version of the law allows authorities to inspect companies’ facilities and electronic equipment, along with their employees’ digital devices, and could turn ordinary interactions and information-gathering by company employees into national security violations. The expanded definition of espionage was also left alarmingly vague, which may provide room for broad interpretation and arbitrary enforcement of the law. At China Law Translate, Jeremy Daum argued that the revisions to the law are probably less consequential than some have suggested because “[m]any of the amendments incorporate previously released legal authority that has already gradually expanded counter-espionage work and powers since the law was adopted in 2014.” However, he highlighted a number of key revisions in the law and in the definition of espionage in Article 4 (in bold):
1. Activities endangering national security, domestically or abroad, that are instigated, supported, or carried out by espionage organizations or their collaborators.
2. Participation in an espionage organization or accepting tasks from one; or seeking to align with an espionage organization.
3. Attempts to illegally obtain or share state secrets or other data, materials, or items related to national security or national interests, which are carried out by or for foreign elements other than espionage organizations.
4. Network attacks, intrusions, or disruptions targeting critical information infrastructure or entities involved with secrets.
5. Identifying targets for enemies.
6. Other acts of espionage. [Source]
Research, legal, and corporate databases have recently been shut down as well, making it harder for foreign businesses to obtain a clear picture of the reality in mainland China. Bloomberg columnist Shuli Ren concluded, “investing in China from thousands of miles away is increasingly a losing trade.” Lingling Wei, Yoko Kubota, and Dan Strumpf reported for The Wall Street Journal on the connection between the closure of databases and government’s push for national security:
Prodded by President Xi Jinping’s emphasis on national security, authorities in recent months have restricted or outright cut off overseas access to various databases involving corporate-registration information, patents, procurement documents, academic journals and official statistical yearbooks.
Of extra concern in recent days: Access to one of the most crucial databases on China, Shanghai-based Wind Information Co., whose economic and financial data are widely used by analysts and investors both inside and outside the country, appears to be drying up.
Following recent expansion of China’s anti-espionage law, aimed at fighting perceived foreign threats, many foreign think tanks, research firms and other nonfinancial entities are finding they can’t renew subscriptions to Wind over what Wind described as “compliance” issues, according to interviews with Western researchers and macroeconomic analysts.
[…This] is part of a broader effort to tighten the Communist Party’s control on how the rest of the world forms its views on China, according to business executives who have consulted with Chinese authorities. It is also an effort to essentially close off China from foreign influence, they say. [Source]
In his China Brief at Foreign Policy, James Palmer described some of the motivations behind the Chinese government’s tightening grip on information:
The targeted U.S. campaign against China’s economy has also led some Chinese officials to try to make that targeting more difficult. After all, the less the United States can find out about the Chinese economy, the less effective its actions will be. Furthermore, a measure of pride is involved: When the Chinese economy was growing at record rates, the country was eager to boast about it. If the numbers are dire or even unimpressive, that increases the government’s desire to cover them up.
Finally, the use of government data by reporters and academics to investigate issues from China’s crimes against humanity in Xinjiang to its salami-slicing tactics on its border with Bhutan have made Beijing increasingly wary about sharing information. In the last four years, China has largely driven out foreign reporters through visa restrictions, harassment campaigns, and police threats, while doubling down on surveillance, especially in Xinjiang. It has become tougher to make personal contacts, and sources are less willing to talk out of justified fear.
China’s latest moves to limit online access to information make the already difficult job of finding out what’s really going on inside the country even more difficult. And while that may soothe official paranoia, it’s only likely to further alienate businesses and investors putting real money on the line. [Source]
Adding to the picture of the increasing securitization in China, the NGO Safeguard Defenders released a new report this week on the CCP’s expanding use of exit bans that prevent individuals—both Chinese and foreign—from leaving the country. They explain the purpose of these state-initiated bans as aiming to “punish human rights defenders (HRDs) and their families, hold people hostage to force targets overseas to come back to China […], control ethnic-religious groups, engage in hostage diplomacy and intimidate foreign journalists.” The NGO’s campaign director, Laura Harth, said: “The report shows that those anecdotal cases that we read about now and then are not isolated incidents, but part of a fast growing trend.” James Pomfret and Angel Woo from Reuters described the scope of the Chinese government’s increased use of exit bans:
“Between 2018 and July of this year, no less than five new or amended (Chinese) laws provide for the use of exit bans, for a total today of 15 laws,” said Laura Harth, the group’s campaign director.
The group estimates “tens of thousands” of Chinese citizens are banned from leaving at any one time. It also cites a 2022 academic paper that found 128 cases of foreigners being exit-banned between 1995 and 2019, including 29 Americans and 44 Canadians.
[…] The Reuters analysis of records on exit bans, from China’s supreme court database, shows an eightfold increase in cases mentioning bans between 2016 and 2022.
[…] Most of the cases in the database referring to exit bans are civil, not criminal. Reuters did not find any involving foreigners or politically sensitive subversion or national security issues. By comparison, the US and EU impose travel bans on some criminal suspects but generally not for civil claims. [Source]
