Why the EU is so worried about China’s anti-espionage law

Valdis Dombrovskis, the European Commission’s executive vice president in charge of trade relations, described the legislation during his trip to China in late September as a “great concern to our business community” whose “ambiguity allows too much room for interpretation” and “significantly decreases” investors’ confidence.

“This is exactly what I mean by a lose-lose outcome,” Dombrovskis said.

What exactly makes the law so troubling for Europeans?

Introduced for the first time in 2014, the bill is intended to “prevent, frustrate and punish” acts of espionage. Its provisions grant the country’s central authorities a broad mandate to crack down on activities that are perceived to be a threat against the “national security, honour and interests”.

The law added to the intricate machinery the Chinese Communist Party has at its disposal to exert control over citizens, companies and organisations. This control has deepened under the rule of President Xi Jinping, who has remodelled the relation between state and party to centralise power in his persona.

Xi’s pursuit for supreme authority has triggered a fraught standoff with Western countries. The Chinese leader has accused G7 allies, particularly the United States, of trying to derail the country’s ambition to become a global leader in technology and innovation. Meanwhile, liberal democracies believe Xi is attempting to dismantle the rules-based order established at the end of World War II and impose an alternative system made in China’s image and likeness.

Under this atmosphere of suspicion and mistrust, the Communist Party has unveiled a string of legal and policy instruments to make sure all aspects of Chinese society, even those taking place abroad, are under an omnipresent oversight of sorts.

This push led to the revision of the anti-espionage law, which came into effect on 1 July.

The text’s main novelty lies in Article 4, which provides a list of acts of espionage that can be repressed. The amended article vastly expands potential crimes beyond the traditional definition of espionage – that is, intelligence apparatuses and their network of agents – and now includes activities “carried out, instigated or funded” by people and entities “other than espionage organisations and their representatives.”

In addition to state secrets, Article 4 covers the illegal collection of “other documents, data, materials or items related to national security” and the execution of cyberattacks, intrusions and disruptions against state property and critical infrastructure. In its final paragraph, it simply lists “other espionage activities” as a conduct that can be criminally prosecuted, without providing further explanation.

The elastic definition of espionage is followed by several articles that shore up the authority of investigators, who are entitled, among other things, to inspect electronic equipment, raid facilities, seize documents, collect data, freeze property and arrest individuals – all of which can be filmed. Foreigners who are charged with spying can be swiftly deported and forbidden from entering Chinese territory for up to 10 years.

Moreover, the legislation encourages vigilantism as it calls on “all citizens and organisations” to “support and assist” the central authorities and “promptly report” suspicious behaviour. Those who do might be given “commendations and awards.”

Running a tight ship

For the EU, the revised provisions of the anti-espionage law are both alarmingly vast and dangerously vague, giving the state a remarkably broad margin of discretion to decide what constitutes a threat to China’s integrity.

Notably, at no point does the text provide a clear definition of “national security, honour and interests,” making the room for interpretation even larger. Actions that were once thought to be harmless can now, in theory, be deemed injurious.

The uncertainty has been compounded by Beijing’s silence about the revised law’s actual purposes, says Vincent Brussee, a researcher of contemporary China at the University of Leiden, in the Netherlands. 

“The concept of national security in China has immensely broadened over the past few decades. It has always been relatively broad. But Xi Jinping has introduced a concept that’s called the ‘comprehensive’ outlook on national security, which essentially means that national security covers all domains of society,” Brussee told Euronews.

“Xi Jinping sees national security as the bedrock of national development.”

One of the defining traits of Xi’s rule has been his zeal to tell China’s story on his own terms to domestic and global audiences. His diplomatic envoys, sometimes referred to as “Wolf Warriors,” are quick to harshly denounce critics who challenge the official line. This firm grip on China’s narrative has driven a global propaganda machine and can help explain the latest amendments to the anti-espionage law.

“China is very keen to make sure that some foreign actors, especially the United States, do not get all of that information that could counteract or contradict whatever the Chinese Communist Party is trying to say,” Brussee said.

“The anti-espionage law looks like a tool to restrict the number of sources that people can draw from, or at least penalise people who manage to constantly find new creative angles to draw on new sensitive forms of information.”

Shadow of prosecution

So who is at risk? What information can be considered a threat?

According to a legal analysis by De Brauw Blackstone Westbroek, a Dutch law firm, the revised law increases scrutiny over companies that handle trade secrets, research and development (R&D) and data related to medicine, geology, demography and other fields of strategic importance. This means information about high-tech, like semiconductors, quantum computing and artificial intelligence, and the military may also become a liability.

The law firm advises multinationals that operate in China to “critically re-examine” all their operations that involve the collection and processing of data and to “carefully assess” if any of their regular suppliers across the country have state affiliations. Special attention should be put on internal audits and investigations, when “extra caution may be needed if overseas transfer of data is involved.”

This could prove problematic for European subsidiaries, which are compelled to uphold adequate due diligence and send regular reports to their headquarters. Under an upcoming EU directive on corporate sustainability, big-sized firms will be required to tackle the “adverse impacts” of their operations, such as pollution, biodiversity loss, child labour and worker exploitation. Those who fail to comply with the directive, which is still not final, will face fines while victims will be empowered to launch legal action.

A separate EU law, also in negotiations, seeks to ban imports of products made using forced labour. Last year, a United Nations report found that forced labour, sexual violence and degrading treatment had taken place against Uyghur, Kazakh and other ethnic minorities in the Xinjiang region, an accusation that Beijing vigorously denied. 

The new rules mean that European companies will need to obtain highly detailed and, at times, sensitive information directly from their Chinese providers. The anti-espionage law could turn this already-onerous bureaucratic exercise into a high-risk gamble, with the shadow of criminal prosecution looming large over auditors and consultants.

A series of police interventions against American companies that occurred earlier this year before the revised law came into force, including a raid in March on the Mintz Group, a corporate due diligence firm, that later resulted in a $1.5 million (€1.4 million) fine for “unapproved statistical work,” suggests Europe’s private sector will have to keep extra tabs and err on the side of caution, even if doing do scales down the scope of their work.

“If companies are not able to comply with these EU requirements, which could potentially entail civil and criminal liability, they will be ultimately forced to leave the market or at least reduce operations in China,” a spokesperson of BusinessEurope, a leading industry association, said in an emailed statement.

“China’s anti-espionage law can potentially conflict with the two pieces of EU legislation, leaving economic operators between a rock and a hard place.”