New Chinese laws on espionage and diplomatic relations went into effect on July 1.
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BEIJING — Analysts say geopolitics is more influential than new Chinese laws for foreign companies in China.
National Security is an increasingly important priority for the country. Two new laws came into force on July 1, one on espionage and the other on foreign relations. They contain catch-all phrases such as “state secrets” that are open to interpretation by local and central authorities.
Earlier this year, news that international consulting firms had been raided in three raids with little public explanation fueled concerns among those considering doing business in China.
From a strict legal standpoint, however, legislative changes in themselves do not increase the risk for foreign companies in China, said Jeremy Daum, a senior fellow at the Paul Tsai China Center at Yale Law School.
Instead, he said, “the current climate of international relations and competing political pressures may cause some businesses to reassess their cost-benefit analysis to accept the risks of doing business in China.”
After decades of increased engagement, U.S.-China relations have deteriorated over the past few years.
High-level talks beyond the presidential level have only partially resumed this year, following U.S. Secretary of State Anthony Blinken’s visit to Beijing.
“The current environment favors more instances where Chinese regulators or government actors choose to act opaquely. This poses risks for U.S. businesses,” said Michael House, a partner at Perkins in Beijing and Washington SAR Office
“It’s detrimental to American businesses when there’s no real opportunity for both governments to talk about the reasons for that action, or to try to better understand the motivations for such actions at the government level, because that opportunity doesn’t exist,” he said. House said.
On the industrial front, advanced technology and its links to the military are a concern for the United States and China, while other industries are less at risk, he noted.
new law
According to English-language media, the new espionage law expands the definition of “espionage” to include “seeking alliances with espionage organizations” and attempts to illegally obtain data related to national security. Chinese legal translation translationa website founded by Daum.
According to a translator, the law also calls on “all levels” of government in China to educate and manage relevant safety precautions.
translation of the site Foreign Relations Act It pointed out that foreign organizations in China “shall not endanger China’s national security, harm public interests, or disrupt public order.”
business out of touch
China’s attitude (on national security) is more defensive and domestic, while the US’s understanding is very global.
alex liang
AnJie Law Firm, Partner
Michael Hart, president of the American Chamber of Commerce in China, said he had raised the business raids in meetings with Chinese officials.
“It’s one of those disconnects that we hear a lot, as long as you’re not doing anything illegal, you have nothing to worry about,” Hart said. “But we don’t have a clear idea of what these companies do that are considered illegal. We continue to call for greater transparency.”
Both Blinken and US Treasury Secretary Yellen met with US companies in China during their visit this year.
The company also faces heightened scrutiny in the United States. The House committee delegation discussed China business when they met with executives from prominent U.S. technology and media companies in California in April.
National Security
Over the past few years, the U.S. and Chinese governments have increasingly invoked the term national security in new restrictions on businesses.
The biggest concern for Chinese companies is the need to consider safety in everything from food to energy, Jens Eskelund, president of the European Union Chamber of Commerce in China, said at a news conference in mid-June.
“I think it creates uncertainty about the exact line between what falls within our security purview and what we can operate as a normal business.”
Cultural and language differences also play a role.
“China’s attitude (to national security) is more defensive and domestic, while the U.S.’s understanding is very global,” said Alex Liang, a Beijing-based partner at AnJie Law Firm.
“For example, China is usually concerned about whether sensitive information is leaked across borders, while the United States is usually concerned about whether its allies provide technology to its competitors and certain target countries,” he said.
The role of law and the court system also have fundamentally different positions in the United States and China. Beijing has struggled to build a legal system in recent years, but the government is run by a single party.
The law firm Perkins points out that because U.S. courts can control the actions of government law enforcement agencies, Chinese companies can file legal disputes over national security-driven behavior—something that is difficult for foreign companies to do in China.
Foreign companies in China could also consider more dialogue with local regulators to better understand what companies are doing and how they can contribute to the economy, he said.
China’s Ministry of Commerce met with foreign pharmaceutical companies on Wednesday and said it would hold regular roundtable meetings with foreign companies to support their operations.
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