Lending Association

China’s tightening security laws

China’s National Congress this week will consider a new law that will make it next to impossible for economists, journalists, analysts, or researchers, let alone foreign companies, to accumulate data and statistics in China.

That’s after state media last week highlighted the looming change in a significant tightening of security laws ahead of the start of the 2024 rubber-stamp National Congress Monday (today).

Chinese state media reported on an order signed last Tuesday by President Xi Jinping, which for the first time contains the extension protections of state secrets to include a broad category of “work secrets.”

Xi’s order formally adopts revisions to a law on Guarding State Secrets – which has been discussed for more than a year without any many of the new classification.

It is reported to be up for approval at the Congress this week.

Chinese state media reported that legislators passed the updated law at a meeting earlier on Tuesday and has a start date of May 1 (the reports automatically assumed the National Congress will rubber-stamp the new law).

Western media reports say the new rules describe how precautions taken for state secrets should also apply to unclassified information to be known as “work secrets.”

The law broadly defines work secrets as information that would result in an “adverse impact if leaked,” and said specific measures would be released separately.

Western analysts say the new law could apply at its widest to everyday data such as changes to revenue projections, sales data, profits, new products, and executive changes – all the things taken for granted in economies like Australia, the US, and the UK.

While China regularly discloses a certain amount of information about government plans and economic data, the data is more opaque relative to many developed countries.

For example, some existing house price data disappeared several years ago and last year monthly figures on the level of unemployment for young people vanished when the rate reached record levels above 20%.

So would reported those figures if they were leaked, constitute a “work secret” or a state secret?

Last year, new laws in espionage and foreign policy included the phrase “state secrets” but in typical Chinese fashion, the interpretation was left open. That will allow the government to (in reality the Public Security Bureau) decide whether the ’secret’ is really a secret or a construct designed to be used to punish the organization or individual alleged to have breached the law.

Now that vague situation will be extended to “work secrets” according to a report on Reuters and CNBC late last week and in other western media.

Separate rules on what kinds of data foreign businesses in China can send out of the country have remained unclarified by the government (an old authoritarian trick) especially what qualifies as “important data” and thus subject to export restrictions.

This lack of clarity remains the biggest risk for anyone doing any sort of business in China and this new group of “work secrets’ only adds to the level of risk.

“The new law will add to a general sense among the foreign business community that the Chinese leadership’s preoccupation with national security has made the country’s operating environment more difficult,” said Gabriel Wildau, managing director at consulting firm Teneo was quoted as telling CNBC.

“China’s economic growth outlook remains the key factor influencing foreign investment decisions, but the secrets law adds another disincentive at the margin,” he said.

The irony remains is that China shows no sign of cutting back on attempts to steal the secrets of foreign companies, governments, or individuals though spying of all kinds, hacking, and worse, as ASIo had made clear in Australia.