China’s Revised Anti-Espionage Law Deems Outflow of Data As National Security Risk

The revised Anti-Espionage Law further strengthens China’s already opaque national security legislation. Under the revised law, which came into effect on July 1 2023, espionage organizations and their agents carrying out or instructing, funding others to carry out, or domestic and foreign institutions, organizations, and individuals colluding to carry out cyber attacks, intrusions, interference, control, and destruction activities against state organs, sensitive units, or critical information infrastructure, also constitute spying activities. 

The New Anti-Espionage Law uses the word “coercion”, as a method along with “inciting” and “bribing”. The revised law applies to espionage organizations and their agents engaging in espionage activities against a third country within the territory of the People’s Republic of China. Jeremy Daum, senior research fellow at Yale’s Paul Tsai China Center, says the new law embodies a whole-of-society approach to tackle anything that is a risk to the broad definition of national security. He said the revised law further tightens control of the Chinese government. 

Daum believes the law is vague, giving the Chinese authorities free hand as it establishes a broad criteria for determining espionage behavior, and grants extensive investigative power to national security agencies. The U.S. National Counterintelligence and Security Center (NCSC) stated that the revised law gives Beijing leverage to access and control data held by American firms in China. It described the new law as ambiguous. 

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In an advisory notice, the NCSC warned that U.S. companies and individuals could face penalties if Chinese authorities label them as spies or alleges them of assisting foreign sanctions on China. But Liu Pengyu, spokesperson for China’s embassy in Washington, said Beijing has the right to uphold and safeguard its national security. He said China will promote high-level opening-up, and provide a more law-based and international business environment for companies from all over the world. 

Craig Allen, president of the U.S. – China Business Council, said legitimate concerns are being raised about conducting routine business activities, as under the revised law, it may be considered espionage. He believes the Chinese market will suffer if the amended law is applied frequently. A law firm Morgan Lewis said foreign enterprises seeking market opportunities may participate in overseas business associations and industry events. If the organizations, under the new Anti-Espionage Law, are identified as agents of espionage organizations, the foreign enterprises’ communication and partnership with them could be considered as espionage activities. 

Moreover, when hiring employees or workforce from overseas countries, there could be involvement of intellectual property or technology transfer. Morgan Lewis recommends foreign enterprises to strengthen their compliance awareness and ensure that their business activities are in line with the Anti-Espionage Law.