Semafor Signals
China expands state secrets law as foreign firms feel the chill
Insights from Xinhua News, Bloomberg, and The Wall Street Journal
The News
China’s top legislative body further strengthened its sweeping law on state secrets this week, in a move likely to stoke fears among foreign firms already concerned about the stringent legislation.
The changes, which take effect May 1, expand the already-broad definition of Chinese state secrets – which includes discussions among Communist Party members, military activities, and economic development plans, as well as enhancements to the country’s science and technology industry.
The revision covers sensitive information related to “work secrets of government departments” — a provision that authorities did not clearly define, with the specifics of the new rules to be published at a later date.
It marks the first time China has amended the law since 2010 and comes amid growing efforts by Beijing to tighten its control over the flow of state information and prioritize national security.
Foreign businesses and investors have voiced concerns about the broad definition of Chinese state secrets, fearing such laws could be weaponized against them. Chinese government authorities have in recent years raided foreign due diligence firms such as Mintz Group and banned foreign executives from leaving the country.
SIGNALS
Move underscores sensitivity and fear surrounding potential leaks
While details remain vague, the change is likely “intended to avoid the leaking of information regarding the organizational structure and decision-making hierarchy of state institutions,” one law professor from the University of Hong Kong told Reuters.
In response to media questions about the expanded law Thursday, China’s National Administration of State Secrets Protection said Beijing faces “unprecedented risks and challenges” in safeguarding national secrets, adding that “confidentiality work is facing a more complex and severe situation.”
The revisions highlight the need to accelerate “innovation in secret-keeping technology,” Bloomberg reported. One such effort includes mandating outgoing government employees who possessed state secrets to go through “secrecy education”, the South China Morning Post reported.
Expansion of state secrets rattles the international business community
China has passed or revised more than 20 national security and information-sharing laws in the past few years, Thomas Kellogg, the executive director of the Georgetown University Center for Asian Law, told The Wall Street Journal, and the latest revision “probably won’t be the last.” The revision has stoked fears that rules could be applied arbitrarily to international companies and investors — amplifying the already-existing challenges of doing business in China at a time when foreign investment has dropped to its lowest level in three decades, The New York Times reported.
“The scope of issues deemed ‘sensitive’ seems to be constantly expanding, which makes it more difficult for companies to access information necessary for making investment decisions related to their China operations,” Jens Eskelund, the head of the European Union Chamber of Commerce in China said in a statement to the Times. The latest iteration of the law comes only a week after China announced that attracting more foreign investment was one of the nation’s top priorities this year, he added.
