New law raises risks for American firms in China, US officials say

US counterintelligence officials say revised Chinese law potentially turns normal business activities into espionage.

US counterintelligence officials say revised Chinese law potentially turns normal business activities into espionage. Picture: Getty Images

US counterintelligence officials are amping up warnings to American executives about fresh dangers of doing business in China under an amended Chinese law to combat espionage.

A bulletin issued on Friday by the US National Counterintelligence and Security Centre, and viewed by The Wall Street Journal, warns the revised law is vague about what constitutes espionage, giving the communist government greater access to and control over companies’ data, potentially turning what would be ­considered normal business activities into criminal acts.

The amended counterespionage law, which takes effect on Saturday, has unsettled foreign businesses in China.

The publication of those revisions this spring came amid a wave of raids, inspections and other acts by Chinese authorities against foreign, chiefly American businesses, as already tense US-China relations worsened. It follows the revelation this week that the Chinese spy balloon that drifted over America in February before being shot down by a US fighter plane was loaded with American-made equipment.

The revised law expands the definition of espionage without defining terms in a way that is “deeply problematic for private sector companies, ” said Mirriam-Grace MacIntyre, who leads the counterintelligence centre.

Teams from the centre have been stepping up briefings for US business leaders since April.

China’s recent actions appeared to focus on due diligence and consulting firms and other businesses collecting information about China’s economy and business climate. Beijing has said that the rights of foreign businesses are protected under Chinese law. “As long as one abides by laws and regulations, there is no need to worry,” a Foreign Ministry spokeswoman said this week.

At the briefings, Ms MacIntyre said she and her teams had received questions from US businesses about the raids on US due-diligence firm Mintz Group and Capvision, an expert-network consulting firm. They have also been asked if officials think it is still safe to travel to China.

“An executive’s decision to travel is their own personal decision,” said Ms MacIntyre, but her team wants to make sure they know the risks.

Officials have been flagging to companies a State Department travel advisory in March urging Americans to reconsider travel to China, citing Beijing’s arbitrary enforcement of laws and use of exit bans blocking the departure of some US citizens.

The revised law expands the definition of espionage from state secrets and intelligence to any “other documents, data, materials, or items related to national security”, centre officials said.

The spying law also imposes new exit and entry restrictions for people deemed to present national security threats, they said, and raises legal risks for US companies, journalists, academics and researchers.

The revised Chinese counterespionage law is among a raft of national, cybersecurity and data privacy laws and regulations that collectively expand Beijing’s oversight of foreign companies operating in China, the counterintelligence centre’s bulletin said. The awareness campaign by the counterintelligence centre follows similar efforts, including one last year that warned state and local government leaders and business executives about efforts by China to lobby and otherwise influence them as tensions with Washington rose.

The Wall Street Journal