Tightening security policies complicates business in China

do business in China it has become more difficult and potentially more dangerous, given the priority the government places national security above all else, despite insisting that the country is open for trade.

At the end of March, the authorities received executives in beijing to tell them that “they are not foreign visitors, but family”, and assure them that the red tape would be eliminated.

But after the lifting of the restrictions anticovid in recent months, China has limited access to data from abroad and reported raids on consulting firms.

Amendments to the anti-espionage laws, which take effect on July 1, will broaden the definition of espionage and prohibit the transfer of national security information.

All this has scared local and international firms, who are trying to decipher the intentions of the authorities and understand what is off limits.

“Companies run to understand the protocols and protect their staff. But the definitions are very vague.an employee of an international auditing firm told AFP.

“No one knows if they have crossed a line or not, or where the red line is,” added.

the american firm Mintz Group He understood he had crossed a red line when police closed his Beijing office and detained five local employees in March.

In April, the US consulting giant Bain & Company said that its employees at its headquarters Shanghai they were questioned.

Last week, in a 15-minute segment on state television, authorities said raids against the global network of experts cap vision in several cities they were part of a campaign to reform the consulting industry in China.

those events “they send a worrying signal and increase uncertainty for foreign companies operating in China”told AFP the Chamber of Commerce of the European Union in Shanghai.

And at a time when “Companies look for clear signs that the Chinese business environment becomes more predictable and reliable, the facts do not help to restore confidence and attract foreign investment,” added.

Jeremy Daum, legal expert at the Yale Universityindicated that the key is that “China believes there are legitimate threats to its national security and will always give them priority over other interests.”

“With increasing international tensions (…) the situation does not seem to be improving anytime soon”he added.

Push the limits

Many experts see the extensive television coverage of the raids as a clear warning to the Chinese about the risk of associating with firms like Capvision.

Capvision, although it is based in NYis essentially a Chinese company.

According to the state television CCTV report, one of his sources leaked information about “manufacturers and quantities of important military equipment”.

“I think that some firms (…) have always been involved in research activities that push the limits, and that has been going on for decades. Now some are trapped”said Bob Guterma, a former Capvision executive who now runs news and economic intelligence site The China Project.

“People are waking up, or let’s say it’s more like a new alert about the dangers that have always existed when doing business in China,” he added.

Under President Xi Jinping, a heavy hand has been applied to sectors where regulations were previously applied more lightly, such as technology.

Lawyer Lester Ross, in Beijing, who specializes in regulatory compliance, told AFP that security forces have pushed for more controls on the data collection industry.

unknown impact

The full impact of the amended security law is still unknown.

Yale’s Daum noted that the original definition of espionage was so broad “It is not immediately clear what the impact of the expanded definition will be.”

The companies “they will have to be much more cautious about collecting information and where they get it from, and that will inhibit their ability to do business”Ross noted.

Access to Chinese data sources, such as Wind Information in Shanghai and the CNKI academic database, have been restricted to researchers abroad.

The newspaper Wall Street Journal reported that the move was prompted in part by a series of reports from US think tanks that used similar tools.

The government instructed the companies governments to terminate contracts with four large accounting firms: Deloitte, KPMG, EY and PwCaccording to Bloomberg.

All this dissonance between recent events and official efforts to attract foreign capital to China added to anxiety.

“The recent raids and the mixed messages they have sent have caused a lot of concern (…) It is going to be even more difficult for many firms to approve additional investments” in China, analyst Bill Bishop wrote.

But authorities believe China is too big a market for firms to leave, the journalist said. Lingling Wei.

“For them there is no contradiction (…) They still believe that they can prevent foreign capital from leaving and at the same time put pressure on foreign firms”indicated.