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In this issue of the Global Impact newsletter, we look at the proposed revisions to China’s state secrets law. Photo: AP

Economy

Global Impact: China’s state secrets revisions move to address ‘worst-case and most extreme scenarios’

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world
In this issue, we look at the proposed revisions to China’s state secrets law

China’s Communist Party

Sylvie Zhuangin Beijing

Published: 2:00pm, 20 Nov 2023

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Digging out forgotten laws from dusty shelves and freshening them up with some trendy security elements has become the latest fashion for Communist Party rulers in China.

It happened as President Xi Jinping called on officials to prepare for “worst-case and most extreme scenarios,” in other words, an unprecedented security threat posed by the United States and other Western powers.

Whether the threats are imaginary or more real than ever, scrambling to expand legal tool kits appears sensible to a Chinese leadership eager to rationalise its moves and defend itself from spies or other forms of external infiltration.

The latest law to be refashioned was China’s State Secrets Law. A dozen new clauses have been added in a draft revision unveiled in late October, the biggest amendment to the statute in over a decade after it was first introduced in 1988.

Education, technology and military facilities, among other areas, were all covered as the draft expanded the reach and depth of the law.

But what constitutes a “state secret” is never clearly defined – making one wonder if anything could be counted when necessary – as Beijing sees itself locked in an intelligence war with Washington.

One clause stipulates that all state employees with access to state secrets are banned from leaving China without prior approval, with the rule applying for some time even after changing jobs or retiring.

Money must be set aside to guard government information from the county level and above, another burdensome administrative cost for local governments that are already facing insolvency after investing all they had into fighting the coronavirus.

The drafted law provides the National Administration of State Secret Protection – a once low-profile office under the State Council, China’s cabinet – with authority to check and question all when it comes to guarding whatever is deemed secret enough to warrant it.

Information security, meanwhile, has also been made a national priority, and funds are being allocated to develop cutting-edge technologies specifically for the purpose of data safety.

Echoing this move, a dozen leading universities have set up national security studies as a new discipline to train young scholars, following the Education Ministry’s call in 2021 to cultivate talent in that arena.

As Beijing faces what it calls “unprecedented uncertainties”, it seems determined to augment its toolbox on state security.

The revised law on state secrets is likely to sail unopposed through the country’s legislative process, as have other laws that have had new coats of national security-tinted paint.

A law governing charities was also chosen for revision in October, with new clauses on having police and state security forces oversee charities in addition to other potential watchdogs, including the taxation and cyberspace administrations.

But the most high-profile amendment in recent months is the one levied on the anti-espionage law, which came into effect in July after its third revision since its introduction in 2014.

The sweeping law expanded the definition of a threat and lists cyberattacks by a “spying entity or its surrogate” as an act of espionage for the first time, sending foreign investors’ confidence to new lows amid a sagging post-pandemic economic recovery. Premier Li Qiang’s 31- point plan to boost business sentiment has not eased worries to the degree China had hoped.

As lawmakers ponder which piece of legislation is due for the next makeover, chilling effects are being felt in the business world. Raids were carried out earlier this year against leading US consulting firms Bain & Company, Capvision and the Mintz Group, whose Asia operations were formerly run by CIA veteran Randal Phillips.

More employees at foreign firms have been banned from leaving China, including US financial and risk consulting firms Kroll and Japanese financial firm Nomura Holdings.

A sense of paranoia and uncertainty is scaring away foreign capital – which China has relied on over the past four decades as one of its critical engines for economic growth.

Foreign businesses are considering downsizing their China offices or closing them for good, fearing an increasingly unpredictable environment will make it challenging to carry out their affairs.

The expansion of Beijing’s legal tool kit can be traced back to 2021, as the new Data Security Law stipulated that companies transferring the state’s “core data” overseas without approval would have to pay a penalty of up to 10 million yuan (US$1.37 million) and could be forced to shut down.

The law laid the foundation for officials to tighten data management and propose more industry-specific regulations, such as the Finance Ministry and cyberspace watchdog saying in mid-November that auditing firms should undergo scrutiny.

China’s top spy agency has also emerged from the shadows and announced several espionage cases, including the capture of two CIA agents in August.

The agency’s chief justified the moves as China having to proactively defend against spies as risks arise in a more unpredictable global environment.

The State Security Ministry brushed aside concerns, saying that the law protected suspects’ rights and set out the process for investigating state security cases.

In a seemingly “grim and complex” state, deemed such by Communist Party leaders, the changes seem to be another example of prioritising politics over economy. The consequences, as always, will remain to be seen.

60-Second Catch-up

Chinese lawmakers review proposed changes to state secrets law amid national security push

China to tighten its state secrets law in biggest revision in a decade

Explainer: How is China changing its state secrets law and who will be affected?

China’s national security push aims to put auditors in cross hairs when sensitive data is involved

Opinion: Clarification needed as China’s secrets law is being revised

China to amend anti-espionage law to cover cyberattacks by foreign spies and ‘surrogates’

All China charities to be overseen by police, anti-spying agencies under proposed revisions to 2016 law

Deep dives

China’s move to amend state secrets law fuels concern among businesses

Draft revision submitted to top legislature at a time of rising geopolitical tensions with US and its allies
There have been calls for clarity as the move deepens fears about the risks of doing business in China

China on Friday began the legislative process of revising its state secrets law for the first time in a decade amid rising geopolitical tensions with the United States and its allies.

A draft revision of the Law on Guarding State Secrets was submitted for deliberation to the country’s top legislature, the Standing Committee of the National People’s Congress (NPC), which is holding a five-day session in Beijing until October 24.

Hong Kong to define state secrets according to city’s needs, minister says

Administration to take reference from other countries and mainland China but use definition that reflects local situation, Secretary for Security Chris Tang says
Beijing on Wednesday revealed expansions to country’s Law on Guarding State Secrets

National security legislation planned for Hong Kong will define state secrets according to local needs, the security chief has said, two days after Beijing announced it will make the biggest revision to the corresponding law in mainland China in a decade.

Lawmakers are expected to take up the legislation, first proposed two decades ago, either this year or in 2024, according to a timeline that city leader John Lee Ka-chiu confirmed in this week’s policy address.

China’s anti-espionage chief urges stronger crackdown using legal tools

Minister of State Security Chen Yixin calls on senior officials to study new anti-spy law and intensify enforcement
Beijing increasingly prioritises national security over economic development as it faces pressure from US and allies, observer says

China’s anti-espionage chief Chen Yixin has called on senior officials to study the country’s new anti-espionage law and intensify its “legal crackdown” related to state security.

Chen, a confidant of President Xi Jinping appointed as minister of state security in October, made the remarks in a front-page commentary published on Monday in the Study Times, an official newspaper of the Central Party School.

Spy games: why the US-China cold war is heating up in public

Intelligence agencies in Washington and Beijing are intentionally more visible than ever, both for domestic and foreign audiences
‘The idea that you can operate clandestine services in the shadows and nobody talks about it, that’s over,’ one analyst says

In another sign of the dismal state of US-China relations, public espionage disclosures have increased markedly in recent months on both sides of the Pacific as spy agencies that once lurked in the dark openly tout their handiwork.

Behind the strategic leaks and veneer of transparency is a shadow play mirroring the broader geopolitics, as intelligence communities face pressure to look effective at home and tough abroad, with little sign that the spy-versus-spy showdown will end any time soon, security analysts and former spies said.

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world.

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