With China’s pandemic restrictions dismantled and leaders courting executives flying back into the country, this should be a spring of renewed investor confidence in the world’s second largest economy.
But a drumbeat of government security measures, including a relaxation of counterintelligence laws, and unannounced visits by investigators to the Chinese offices of several foreign companies have raised a shiver of concern that economic pragmatism under Xi Jinping could once again give way to a heightened focus. on state control.
International consultancies and consultancies are among those questioned by Chinese security agents in recent weeks, heightening fears among foreign investors that authorities are trying to stifle their access to unvarnished information about markets, competitors and possible deals in China. The investigation has left some companies wondering whether their business in China is at risk.
Agents visited the Shanghai office of Bain & Company, a major US consulting firm, and questioned employees, Bain said in late April. And the Mintz Group, a US company that specializes in corporate investigations, said in late March that officials visited their Beijing office and detained five Chinese employees.
“Businesses are nervous about the number of visits foreign companies are getting with no explanation as to why,” said Michael Hart, the president of the US Chamber of Commerce in China.
Overall, they appear to reflect demands from Mr Xi and other senior leaders to strengthen national security and, in particular, to cut off the flow of potentially sensitive information to foreign governments and investors. Since coming to power in 2012, Mr. Xi urged vigilance against the influence of the United States and the West. His caution has redoubled as relations with Washington have soured under the Trump and Biden administrations.
“The Chinese Communist Party is taking a multi-pronged approach to achieving supremacy in data control, and thereby broader societal and geopolitical control,” wrote Matthew Johnson, a visiting fellow at the Hoover Institution, in a new report on China’s quest for data dominance. .
Mr Xi and other senior officials have said the United States is pursuing a long-term offensive to thwart China’s rise by cutting off access to technology for advanced industries and military innovations. The Biden administration’s strict restrictions on the sale of advanced semiconductors and chip-making equipment to China, which were inaugurated last year, appear to be the belief of Mr. Xi that Washington is engaged in “comprehensive containment, encirclement and suppression of China”.
US consulting firms in particular appear to be attracting the attention of China’s Ministry of State Security, with officials showing up to ask questions about the firms’ work and their dealings with embassies.
It is part of an increasingly dangerous environment for foreign companies. Beijing commissioned a cybersecurity assessment of US chipmaker Micron Technology in retaliation for semiconductor trade restrictions. A Japanese pharmaceutical director was arrested on suspicion of espionage. China has also intensified the use of travel bans to prevent people, such as business people, from leaving the country.
While China has historically targeted foreign companies, the targets have often been major consumer brands and media shaming. The latest repressions are different. Mintz and Bain are cogs in the global trading machinery, but they are not household names, and China has said little about the visits.
Official Chinese media reports have suggested Beijing’s concern over security issues could be the driving force behind the activity.
An official report, released on the occasion of China’s annual National Security Education Day on April 15, said an unnamed consultancy in southern China had provided research to a foreign group on labor in Xinjiang, which the United States has placed under heavy trade restrictions. due to allegations of forced labor by Uighurs, a predominantly Muslim ethnic group.
The Chinese government denies that forced labor has taken place in Xinjiang’s cotton, textile, mining and other industries. The consulting firm’s work on Xinjiang amounted to a violation of anti-intelligence laws and regulations and “posed serious risks and hazards to national security and interests,” the Chinese report said.
To strengthen China and the Communist Party, Mr Xi has pushed a sweeping “comprehensive” national security program, expanding new security measures in the economy, business and data management.
“We must ensure national data security effectively,” said Mr. Xi in March at a meeting of the Politburo, the top two dozen Communist Party officials, who discussed China’s “big data” strategy.
The security requirements of Mr. Xi have stirred the entire Chinese government.
Last year, China’s cyberspace administration introduced new rules for data transferred abroad, requiring it to be assessed by the agency for its “degree of sensitivity” and potential risks to “national security.”
Since March, the China National Knowledge Infrastructure, or CNKI, a company that distributes Chinese research papers, dissertations and statistics to foreign universities and other users abroad, has severely restricted access to it. CNKI cited the need to suspend such services while figuring out how to enforce the data export rules introduced last year.
Since a Communist Party Congress in October, Mr. Xi has pushed forward a cohort of security officials who seem eager to continue this push for tighter controls.
“Along with the profound changes in the international and domestic environment, the scope of national security is constantly expanding,” Chen Yixin, the minister of state security, wrote in an article for the party’s main ideological magazine last month.
US Ambassador to China R. Nicholas Burns criticized the espionage law on Tuesday.
“This is a law that could potentially make illegal in China the kind of everyday activities that a company should do to seek due diligence before agreeing to a major investment deal,” he said.
It seems that European companies have not caught the attention of China’s security establishment, as Europe’s national leaders have generally taken a more accommodating stance towards China than the Biden administration. But European companies also say it is critical to maintain public access to information about markets and companies.
“There is a great need for clarification on what information is sensitive and what is not,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China.
Dan Harris, a Seattle-based lawyer who works with foreign companies in China, said he had heard in the past week of at least two U.S. companies looking to leave the country after seeing signs that the Chinese Communist Party had check.
“The message is, ‘We don’t care that much about the economy. What matters to us is keeping you in line,” Mr Harris said. “‘And if you don’t do what we want you to do, we’ll come after you.'”
Anne Swanson And Edward Wong reporting contributed.
