China's new Counter-Espionage Law: Possible domestic and global effects

The influence of the People's Republic of China has been growing exponentially around the world during the last decades. Nevertheless, this new global influence could be diminished by the continuous promotion of restricted policies that decrease the liberty of its citizens, most recently with the approval of a new and more restrictive Counter-Espionage Law.

Undoubtedly, the Counter-Espionage Law is going to change the definition of espionage and national security. It will also have a great impact on civil society, limit research topics, damage the social standing of citizens, and increase fear among them. It is within this context that this analysis seeks to find the root causes leading to the implementation of this law. And, most importantly, it seeks to explain the consequences this will have for the Chinese citizens and diaspora, and the rest of the world.

In the analysis, I will firstly explain the various features of the new law, and thereafter the political and cultural causes that led to the law. The next part of the text will examine the main effects that this new development will have nationally and globally in different aspects of society, such as individuals, families, or companies.

Counter-espionage law

It is important to understand what this law is about and how it transforms the significance of terms like espionage and security. The newly revised and more controlled Counter-Espionage law came into force on 1 July 2023, after it was proposed in December 2022 and introduced in April 2023. However, it has not been the first law of its kind, since the Communist Party of China has been imposing other restrictions related to national security for a couple of years now. Some of them started to appear as a consequence of the battle between the People's Republic of China and the United States.

According to general provisions established in the law, "the counter espionage work shall be conducted under the uniform leadership of the state's central authorities." Article 3 states that the efforts "shall be conducted in accordance with law, respect and protect human rights, and protect the lawful rights and interests of individuals and organizations." Nevertheless, it doesn't clearly specify what those interests are, and, therefore, this ambiguity can be exploited.

The major difference that can be found with the previous law, however, is Article 4, which explains the acts of espionage (the prior law didn't include this specification). Among them can be found "activities that endanger the national security of China prompted by espionage organizations and its agents (art. 4.1); activities carried out by foreign institutions, organizations and individuals different to espionage organizations (art. 4.3); or conducting other espionage activities (art. 4.6)". This last part is the one that gives the term "espionage" such a broad definition since it allows any activity to be considered espionage if wanted.

The law bans the transfer of information related to national security and interests, and since it does not specify neither espionage nor interests, it allows authorities carrying out an anti-espionage probe to achieve access to data, electronic equipment, and information on staff property. All in all, its main objective is to increase control over the population and the information that they are exchanging under the facade of "espionage".

Political and social causes

With this in mind, before exposing the possible effects that the law is going to have, it is necessary to comprehend the causes for this expansive control.

I. Domestic causes

President Xi Jinping has been systematically weakening the system of collective leadership that was established to avoid the excesses seen during the Mao era. He has introduced new measures with the objective of consolidating greater staff power. Some courses of action have been changing the constitution to abolish the two-term limit for the ruling of the president and tightening the Party's centralized social control through law, which is of essential importance for this matter.

According to Chen Yixin, the minister of State Security, "the political security is the top priority of national security, and the most fundamental is to safeguard the leadership and ruling position of the Communist Party and the socialist system with Chinese characteristics". They want to ensure that the political system that they have been building for almost a century continues to persist, with the figure of Xi Jinping leading it. All things considered, it is evident that the Chinese Communist Party's ideology dominates over the State and Society and wants to continue doing so.

II. Geopolitical causes

Another reason for this law being altered into a more controlled one is that the party is feeling threatened by the West, especially the US. The international order is currently experiencing a great power rivalry between China and the United States. The Chinese government is trying to challenge the position of the US in global hegemony. Both of them are carrying out operations to advance in the battle and tensions have been growing. China, in order to control threats from the US and proceed with its intentions, is consolidating a greater centralized control over the citizens with more restrictive laws.

Moreover, most Western states have been accusing China of actions of espionage and cyberattacks, most recently with the spy balloon incident. Other accusations have been Chinese interference in foreign elections, both in the US and Europe. In the US elections, China used hacker groups to question the efficacy of voting and promoting "civil war" as a possible way to remove the United States' "ineffective and incapacitated" system; and social average campaigns by manipulating sentiments regarding themes like radical injustice aimed at dividing US voters. The interference in European elections could be seen, for example during the German 2021 elections. China's main objective was to give benefits to its own industry and infrastructure and sway political and economic decision-makers in its favor. They used "malicious cyber activities that significantly affected economy, security, democracy, and society."

Because of this, the Chinese government has been wary and has started to counter-attack by declaring that it is under threat from spies coming from the US and from the rest of the world. The Foreign Ministry commented that the United States is the "empire of hacking" and to protect China from it the government needs participation from the citizens. The statement seems to connect perfectly with the broadening definition of espionage. Due diligence firms and consulting companies from the US that are located in China have also been closely inspected and are suffering the consequences of the law, which will be developed later.

Domestic and global effects of the law

Although the analysis is limited by the recent nature of the law, the impact it will have will certainly increase with time. To analyze the possible effects, we will divide them into domestic and global effects.

I. Domestic effects

i. Effects on the Chinese citizens

Chinese citizens are going to be majorly affected by the expansion of the meaning of "espionage" brought about by this law. The privacy of their actions is going to be violated and many of them will become hesitant when interacting with others, especially when deciding what information they should provide.

If the government thinks during an investigation that documents or data can be considered as related to espionage, workers in companies could be fired or even sent to prison for treason. An example of this happened when a military industry worker in China was arrested because of accusations from the government of conducting actions of espionage with the CIA.

Another change that could happen is the effect on the social standing of a citizen. If a Chinese citizen is accused of conducting actions of espionage and therefore punished, his or her social position and status will possibly deteriorate. High-positioned figures could lose their jobs and their reputation would be stained by it. All in all, they would need to start over with their professional lives from a lower position and be seen as a betrayer.

The counter-espionage law must also be seen together with China's social credit system, which was implemented prior to the counter-espionage law. The system was imposed with the intention of reporting on the "trustworthiness" of individuals, corporations, and governmental entities across the country. High numbers in the system indicate that citizens can be trusted in their work. Consequently, if someone fails to score high numbers because they have been considered as a traitor, they can be sanctioned with, for example, higher taxes or even blacklisting. Moreover, the repercussions of having a low score can include bans, reduced employment prospects, or, even, public shaming. Therefore, a combination of the two can have various serious consequences for an ordinary citizen.

In addition, the People's Republic of China is known for having a population composed of many minorities. These groups of people are located all around the Chinese territory and have very different living conditions depending on their location. Less protected minorities like the Uyghurs can be expected to be more affected by the law than other groups.

ii. Effects on Chinese companies

In terms of effects on Chinese companies, they are going to have to change their course of action in many of their sectors. As with citizens, accusations of conducting espionage could develop into penalties or even the closure of the enterprise in the hands of the government. If this were to happen, not only would it have negative social effects and economic losses for the companies, but also for the workers who would be unemployed and seen as collaborators to actions of espionage. Therefore, Chinese companies should be even more careful of the data they transmit since they have more to lose than other sectors. It is expected that the most supervised type of companies are going to be consulting firms, corporate diligence firms, or newspaper offices. But also, it can be expected to affect essential companies for day-to-day life. All in all, every sector could be in the eyes of the government since the definition is so broad and doesn't define any specific interest they are looking for.

iii. Economic effects

Due to the one-child policy, Chinese society has been in recession for a couple of decades. In addition, its growing national market isolationism is affecting its economic development globally. In consequence, having the counter-espionage law approved may lead to people losing their jobs. In terms of international companies, they could start to choose not to open offices in the Chinese territory. Without the presence of these companies, they may lose international influence which could have a negative effect on the economy and society.

II. Global effects

The global effects that are projected are also enormous. The three main groups conditioned by it are the foreign companies located in China, the Chinese diaspora, and the foreigners living in or traveling to China.

i. Effects on the Chinese diaspora

The Chinese diaspora can also expect to see changes in their day-to-day life because of the counter-espionage law. Currently, there are over 50 million Chinese overseas, some of them around other countries of Asia and others that have moved further, like to the US. Some of these people who decided to move away were students who went to other countries for university studies. Young adults nowadays have a real presence on social average and tend to comment about their lives frequently. With the implementation of the law, the government can also consider information published on social average as espionage.

An example of this is the case of a student in Japan, who was originally from Hong Kong, who was detained because of her social average posts. Seeing this, other Chinese students who were planning to return to their homes during the summer break (specifically during July, when the law was passed) started to take precautions and be careful about what they had on their phones in order to avoid getting detained at the airport or during their stay there.

It is important to understand that having apps on your phone that are not permitted in Chinese territory like Telegram or Instagram, can be seen as dangerous to national security. All because a lot of what is happening is caused by the friction between the US and China and these apps are Westernized.

ii. Effects on foreigners living in China

Another group that is going to have trouble because of the law is the foreigners living in the People's Republic of China or who are planning to go there for vacation.

An example of this is John Shing-Wan Leung, a US citizen living permanently in Hong Kong. In 2021, he was put in jail by a counterintelligence agency. The reason for his retention was charges of espionage. At the time, nothing else was said, but recently the Ministry of State Security claimed that Leung had been part of a US intelligence agency. He was accused of spying on the Chinese diplomats and officials visiting the US. The allegations have not been confirmed nor denied, but for now, he is expected to spend the rest of his life in prison, since he was given a sentence for life.

Hong Kong recently appointed as its national security chief one of the deputy ministers of mainland China. He is expected to play a major role in the stability of the city. The case of Hong Kong is of great importance for the study since there have been multiple protests in the area, for over 20 years now, about mostly foreign policy and internal security issues.

iii. Effects on foreign companies located in China

The last group that should be analyzed is the foreign companies located in China. As the People's Republic of China is one of the biggest economies in the world, many international companies have taken some of their offices to the Chinese territory. At the time of doing that, they probably didn't expect the counter-espionage law to be introduced. Nevertheless, many of those companies have decided to close their offices and leave the country. The effects of the implementation are similar to those of national companies, but unlike those, an accusation of espionage for an international company could have greater consequences since they have a presence in more than one country and have more to lose.

Some examples of this dilemma are US companies like the Mintz Group or the Bain and Company. The Mintz Group is an American corporate due diligence firm. Its office in Beijing was first raided and closed in March and currently is facing fines of over 1.5 million dollars for what the Chinese government calls "foreign related statistical investigations" without consulting for confirmation of the government. For its part, Bain and Companyhadits offices in the capital visited and the authorities questioned its workers, taking away some of their phones. Currently, they have decided to separate its data to prevent any more investigations in its offices, meaning that it is keeping Chinese data on local servers within its Shanghai branch and not communicating it with its offices in the US.

But these two are not the only companies that have suffered the presence of Chinese authorities in their offices and probably, with time others will have to change their ways of action too.

Conclusion

Clearly, the Chinese Communist Party knows what it is doing when approving and promoting the counter-espionage law. Its objective of having Chinese society under a more rigorous control can definitely be achieved with this law and is already starting to show its first signs. Chinese society certainly needs to prepare itself for further restrictions to its freedom. Mostly because it doesn't seem like Xi Jinping or the Communist Party will stop taking measures until China is under absolute control of a central leadership.

A lot depends on how Chinese tensions with the United States evolve. Moreover, the escalation of the Russia-Ukraine War and the new Israel-Hamas War will definitely create a new set of challenges for China, perhaps increasing its control over its own citizens. One must wait and watch to see how the situation unravels in a rapidly changing international situation.