New Chinese Laws on Espionage Are a Major Risk for American and Foreign Companies

The U.S. is warning that harsh Chinese national security laws that went into effect this month are potentially dangerous for American and foreign companies doing business in China.

The National Counterintelligence and Security Center, the top U.S. counterintelligence operation, cited in a June 20 bulletin Chinese laws that broaden the definition of espionage and expand Beijing's oversight on foreign companies. The laws went into effect July 1.

“U.S. companies and individuals in China could also face penalties for traditional business activities that Beijing deems acts of espionage or for actions that Beijing believes assist foreign sanctions against China,” said the NCSC in the bulletin. The center's mission is to drive the U.S. federal government's counterintelligence and security activities; liaise with private sector entities at risk of foreign intelligence penetration; and issue public warnings regarding intelligence threats.

China's new counter-espionage law broadens the definition of spying to include “any documents, data, materials, or items related to national security interests,” according to an English translation of the law. Previously, the law only covered state secrets and intelligence, according to Forbes. 

The new foreign relations law states that foreign organizations “must not endanger China’s national security, harm the societal public interest, or societal public order.” 

By not defining what would be considered a threat to national security or societal public interest, the new laws create uncertainty for foreign companies, according to the NCSC. 

The laws took effect after Chinese authorities raided three foreign consulting and due diligence firms, including the U.S.-based Mintz Group and Bain & Company, earlier this year, Reuters reported. 

Authorities detained five local employees during the raid in March on Mintz Group offices in Beijing. At the time, the company said it had not received a legal notice on what prompted the raid, according to Reuters.  

“There’s just a big question mark right now, over how welcome investment is,” American Chamber of Commerce in China President Michael Hart told Time. “The combination of these things has made people a little bit more concerned about data in general, transparency around how you could transgress rules.”

THE NCIS bulletin added that the new laws have the "potential to create legal risks or uncertainty for foreign companies, journalists, academics, and researchers." It said that "any documents, data, materials, or items could be considered relevant to PRC national security due to ambiguities" in the new laws.