China spy agency lashes out at ‘ill-intentioned foreign forces’ that conflate espionage with business

China’s top spy agency has once again hit back at criticism of anti-espionage and state-secret laws, in an effort to assuage rising concerns among foreign investors about the nation’s increasingly opaque business environment.

The claim that the anti-espionage law worsens the business environment and has a chilling effect on foreign investment in China is “a fallacy”, while the law is designed to “further clarify the boundaries between legal and illegal, reduce uncertainties and assist businesses in operating more effectively in accordance with the law,” China’s Ministry of State Security (MSS) said on its official WeChat account on Wednesday.

“Some ill-intentioned foreign forces are fanning the flames and smearing China by accusing it of generalising national security and creating an atmosphere where normal business activities in China could be labelled ‘spy behaviour’,” the security agency said.

It explicitly called out the United States for using the Economic Espionage Act of 1996 to “suppress international competitors” and “concoct dozens of so-called Chinese economic espionage cases” – similar to allegations that Washington is making of Beijing now.

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And the MSS said any suggestions that China’s anti-espionage law has led to an acceleration in economic decoupling equate to standing the facts on their head.

The rebuttal came as the foreign business community has repeatedly raised concerns about China’s recently revised anti-espionage law, as well as a series of raids of foreign consultancy firms earlier this year. Foreign firms have also flagged a lack of transparency in regulations concerning portfolio investments, cross-border data transfers and intellectual property protection.

Foreign chambers have also voiced worries over policy ambiguity and data security, as businesses struggle to figure out where the red lines have been drawn.

The contention comes at a critical time for China as its leaders attempt to charm and reassure Western investors who are so concerned about the prospects of relying on China that they have ramped up de-risking efforts by diversifying business away from the country.

[I]t is clearly an intentional effort to mislead and create confusion to conflate state secrets with trade secrets

Ministry of State Security

Under pressure to fend off such efforts and retain foreign firms, Beijing has released guidelines pledging more market access, speedier cross-border data flows and easier visa access, with an aim to lure foreign talent and capital. But analysts often point out that such measures will take time to yield results, and some contend that more still needs to be done.

The MSS contends that the anti-espionage law targets a very small number of espionage activities that pose a threat to national security, without focusing on regular business activities. And it said the law will have no impact on the “legitimate” investments and operations of foreign enterprises in China.

“Distorting the lawful investigation of espionage criminal activities as ‘crackdowns on foreign businesses’ is a typical case of concept manipulation and flawed logic,” the ministry statement said. “And it is clearly an intentional effort to mislead and create confusion to conflate state secrets with trade secrets and forcibly link business activities with espionage.”

According to Ministry of Commerce data, the number of newly established foreign-invested enterprises reached 41,947 in the first 10 months of this year, representing year-on-year growth of 32 per cent.

However, the actual foreign capital used in the same period totalled 987.01 billion yuan (US$136 billion) – a year-on-year decrease of 9.4 per cent.

And direct investment liabilities – a broad measure of foreign direct investment that includes foreign companies’ retained earnings in China – stood at a deficit of US$11.8 billion in the third quarter, according to the preliminary balance of payments data released by the State Administration of Foreign Exchange, marking the first quarterly deficit since 1998.

South China Morning Post