‘Worried and fearful’: China’s move to amend state secrets law fuels concern among businesses

China has initiated the process of amending its state secrets law, a significant move that hasn't been undertaken in the last decade. This comes amidst escalating geopolitical tensions with the United States and its allies. The draft revision of the Law on Guarding State Secrets has been submitted to the country's top legislative body, the Standing Committee of the National People’s Congress (NPC), which is currently in session in Beijing. Although the specifics of the revision are not yet known, it is expected to be comprehensive. The amendment will introduce new clauses to reinforce the ruling Communist Party’s authority over all matters pertaining to information security. It will also, for the first time, articulate the government’s support for research and application of key technologies in the field of information security. The amendment is anticipated to be approved by the legislature. Beijing considers this update crucial, especially in the face of an escalating intelligence war with the US and its allies. However, this move is likely to exacerbate the apprehensions of foreign investors and companies about the risks associated with doing business in China. Jens Eskelund, president of the EU Chamber of Commerce in China, has urged Beijing to provide greater clarity and help businesses understand China’s boundaries, suggesting that the deteriorating environment may deter European companies. The amendment, which is almost certain to be passed by the NPC, will be the first major update to the law that was enacted in 1988 and revised in 2010. The law encompasses the definition, supervision, and management of state secrets. This comes at a time when national security has become a top priority for Beijing this year, with the leadership emphasizing the importance of anti-espionage efforts and the need to address perceived security loopholes. Earlier this year, President Xi Jinping highlighted the country’s increasingly complex security concerns, urging officials to prepare for worst-case and extreme scenarios amidst rising geopolitical tensions. State Security Minister Chen Yixin has also urged the security apparatus to severely crack down on those who might steal China’s state secrets and called for stricter national security measures, citing risks from a more unpredictable global environment. The latest revision to the state secrets law includes new provisions that provide fresh legal grounds for what Beijing perceives as successful and effective practice in upholding information security over the past decade. Yang Heqing, a spokesman for the NPC Standing Committee’s Legislative Affairs Commission, stated that the revision was necessary to cope with the new situation and tasks facing security work. He said the revision aimed to ensure the security of state secrets and facilitate the rational use of information, and to provide legal protection to promote the construction of a strong nation and the rejuvenation of the nation. The proposed revision has sparked concerns and suspicion among the business community. Foreign consulting companies were targeted in national security raids earlier this year, while the top state security body has called on the public to join the fight against spying, describing the current state of anti-espionage efforts as grim and complex. This came after Beijing pledged to take all necessary countermeasures in response to Washington’s stepped up efforts on information collection in China. In July, CIA director William Burns told the Aspen Security Forum that the agency had made progress in rebuilding its spy networks in China. James Zimmerman, a partner in international law firm Perkins Coie and former chairman of the American Chamber of Commerce in China, expressed concern about the vague regulation of state secrets. He said that the regulation of state secrets that are presumably protected under the law is vague, ambiguous and applied in an overbroad and hindsight manner that places foreign businesses and their personnel in jeopardy of non-compliance. He called for greater clarity on what documents or information constitute a state secret and the processes surrounding the designation thereof. A Taiwanese businessman, who only gave his surname, Chang, due to the sensitivity of the matter, said the latest move to tighten the security network would impact his digital communications firm in Beijing. Chang said his business had already suffered due to the economic downturn and he was worried and fearful about what was to come. He said the move could result in resources being monopolized by some platforms, making it harder for private sector businesses like his to make money or expand. A Beijing-based economist, who also requested anonymity, said sentiment among foreign businesses in China was already pretty low. He said that Beijing is aware of the concerns but it will proceed with what it deems right or necessary. He added that foreign firms are very legalistic but the reality in China is that some work related to national security, anti-espionage or safeguarding state secrets is done with or without a law. These are the operating realities they face if they decide to remain in China.