Doing business in China

Doing business in China has just become more risky.

Changes to espionage laws and the imposition of bans on people leaving China pose increased risks for visitors, including professionals, business executives and scholars.

The Xinhau newsagency reported that Chinese lawmakers voted a week ago to adopt a revised Counter-Espionage Law, which will take effect on July 1, 2023.

The revised law was passed at a session of the National People's Congress Standing Committee.

Adopted in November 2014, the current Counter-Espionage Law is a special law that regulates and safeguards the fight against espionage, which plays an important role in safeguarding national security, said Wang Aili with the Legislative Affairs Commission of the NPC Standing Committee.

The law, which previously covered state secrets, does not define what falls under China’s national interests.

The revised law expands the definition of espionage, specifying acts such as carrying out cyber-attacks against state organs, confidential organs or crucial information infrastructure as acts of espionage.

It also expands the scope of targets of espionage, with all documents, data, materials and articles concerning national security and interests included for protection, Wang said.

The revised law allows authorities carrying out an anti-espionage investigation to gain access to data, electronic equipment, information on personal property and also to ban border crossings.

This includes access mobile phones and laptops.

This vague, wide-ranging extension to the laws heightens the risks for foreigners in China, especially anyone collecting, creating, using or processing data – in other words, many providers of business services.

Normal business activities, such as gathering commercial information, is potentially caught by the laws.

Even before the passage of the news laws, foreign firms have been targeted by the CCP.

The Shanghai office of the global management consulting firm Bain & Co was raided recently and staff interrogated.

This follows similar actions against Deloitte and the Mintz, two other global firms. Five Beijing Chinese employees of the Mintz Group, a major legal firm involved in corporate analysis, due diligence, and corruption investigations, were arrested.

In 2013, a British corporate investigator, Peter Humphrey and his American wife, who operated ChinaWhys, a risk consultancy business, were arrested after working for the pharmaceutical company GSK. They were evantually released after some two years imprisonment.

“I am aware of other, smaller western consultancies currently being harassed which are not yet in the news,” Humphrey wrote after the news of the actions against Bain & Co.

China has also failed to renew subscriptions of foreign entities to Wind, an information company that provides data-bases of corporate registrations, patents, procurement documents, as  well as official statistics.

The Chinese Communist Party (CCP) has been widening the legal landscape for imposing exit bans and is increasing their use against everyone from human rights defenders to foreign journalists according to a new report by Safeguard Defenders

The report ‘Trapped: China’s expanding use of exit bans’ deploys official data, an examination of new laws and interviews with victims to explore how the country is increasingly resorting to exit bans to punish human rights defenders 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.

China has approved new amendments to its Counter-espionage Law, that will allow exit bans on anyone under investigation (Chinese and foreigners) or on Chinese nationals if deemed a potential national security risk after leaving the country.

Between 2018 and July of this year, no less than five new or amended laws provide for the use of exit bans, for a new total of at least 15 laws. 

“In the absence of transparent official data and excluding ethnicity-based exit bans, which number in the millions, we estimate that at least tens of thousands of people in China are placed on exit bans at any one time,” the organisation reports.

“Dozens of foreigners are also being prevented from leaving China if they work for a company that is involved in a civil dispute. Deliberately vague wording in the Civil Procedure Law means that individuals not even connected to the dispute can be trapped in China.”

Irish businessman Richard O’Halloran was barred from leaving China for more than three years (2019 to 2022) because the company he worked for was involved in a commercial dispute, even though he wasn’t even working for the firm when the dispute began.

Another study revealed that 128 foreigners being banned from leaving the country between 1995 and 2019.

In some cases, the targeting of foreigners is part of Beijing’s hostage diplomacy, a tit-for-tat retaliation aimed at a foreign government or a tactic to extract concessions. Often, the action is more serious, such as arbitrary detention, or sometimes exit bans are used in the initial stages.

In December 2018, two Canadians, Michael Kovrig and Michael Spavor were arrested in China in retaliation for the arrest of Huawei’s chief financial officer, Meng Wanzhou, in Canada.

Kovrig was a former Canadian diplomat and advisor for the International Crisis Group, and Spavor a consultant working on North Korea. They were indicted under China’s vague state secret law.

When Meng was released after agreeing to a deferred prosecution deal relating to bank and wire fraud charges in the US, the two Michaels were released.

The reality under the CCP is that lawyers, judges and courts are agents of the regime.

In a directive by the Central Committee of the CCP, published in February, law schools, lawyers and judges were instructed to “oppose and resist Western erroneous views such as ‘constitutional government’, ‘separation of three powers’ and the ‘independence of the judiciary’.”

Two prominent human rights lawyers, Xu Zhiyong and Ding Jiaxi, were recently sentenced to more than a decade in jail after being convicted of subversion of state power after secret trials.

Not that trials in China are impartial with a conviction rate of over 99 per cent!

For several years now, the US State Department’s travel advisory on China has warned that Beijing uses exit bans to “gain bargaining leverage over foreign governments.”

The Australian Department of Foreign Affairs merely advises travellers to China to “exercise a high degree of caution.” It is perhaps time that the advice was updated to reflect the increasing risks involved in visiting the PRC.

 First published in the Epoch Times Australia.