The top American ambassador in China has requested Beijing to clarify the recently modified Counterespionage Law, which he claims might make some routine activities of American academics, journalists, and businesspeople in the nation unlawful.

On April 26, the National People’s Congress (NPC) standing committee approved a modification to the country’s anti-spy statute. The new legislation will go into force on July 1.

The phrase “join or accept tasks from” an espionage organisation will be changed to “take refuge in” it in the definition of offenders. Additionally, the scope of the coverage will be expanded from “state secrets and intelligence” to “other documents, data, materials, and items related to national security and interests.”
“This is a law that could potentially make illegal in China the kind of mundane activities that businesses would have to do,” US Ambassador to China Nicholas Burns said Tuesday during a webinar organized by The Stimson Center, a Washington-based think tank.

“We need to know more about it so we are asking questions here in Beijing.”

Before agreeing to significant investment projects in China, American businesses must conduct due diligence, according to Burns, and they also need full access to economic data in order to make estimates.

“The law could possibly imperil academic research. Professors and journalists could get caught up on this. But what we know so far is not positive,” he said.

Five Chinese employees of the US due diligence company Mintz Group were detained in Beijing in March.

The Boston-based management consulting firm Bain & Company revealed last week that during an operation three weeks prior, Chinese police had interrogated its employees in Shanghai and seized some computers and smartphones.

“We are very concerned about this. We have made our concerns known,” Burns said. “We think American businesses here ought to be free of intimidation from the government. And the rule of law should prevail.” Businesses should not be targeted simply on account of “political differences and competitive differences in the US-China relationship.”

He stated that the US expects that American scholars, journalists, and businesspeople can feel secure while carrying out their duties in China.

“Companies of all countries are welcome to have economic and trade cooperation in China,” Mao Ning, a spokesperson of the Chinese foreign ministry, had said last Friday. “We are committed to fostering a market-oriented, law-based and world-class business environment. China is a law-based country. All companies in China must operate in accordance with the law.”

Mao then stated that due to a lack of knowledge, she was unable to comment on the Bain issue.

According to a Wall Street Journal report published on Sunday, the Chinese government has recently restricted or completely blocked off access from abroad to databases containing data on corporation registration, patents, procurement papers, academic publications, and official statistical yearbooks.

In a statement on April 28, the US Chamber of Commerce stated that the Chinese government’s anti-spy law change is “a matter of serious concern for the investor community and likely is as well for their local business partners in China.”

It said that in a setting where risk cannot be accurately assessed and legal ambiguities are growing, international investment will not feel welcome.

“We are closely monitoring the heightened official scrutiny of US professional services and due diligence firms in China,” it said. “The services these firms provide are fundamental to establishing investor confidence in any market, including China.”

The Wall Street Journal reported on April 28 that Exante Data’s study showed that over the five trading days last week, foreign investors withdrew a net US$3.17 billion from Chinese stocks via Hong Kong’s Stock Connect.

The Chinese government shut off all communication with the US for several months after Nancy Pelosi, the former speaker of the US House, disregarded Beijing’s warning and visited Taiwan in August of last year. Following the meeting between US President Joe Biden and Chinese President Xi Jinping in Bali in November of last year, the two sides started talking again about Taiwan, Ukraine, climate change, and trade issues.
After a Chinese “spy balloon” appeared in North American airspace in late January, US-China tensions rose once more. Falling orders and sluggish investments from the West also upset Beijing.

According to dollar-denominated statistics provided by the General Administration of Customs on April 13, China’s exports to the European Union decreased by 7.1% year over year in the first quarter, while shipments to the US decreased by 17%. The rise in shipments to ASEAN nations, Africa, and Russia more than offset the loss.

China’s foreign direct investment (FDI), measured in US dollars, increased year over year in the first quarter by only 0.5%, a substantial decrease from 32% during the same time last year.

China will give soliciting foreign investment a higher priority, according to the Politburo of the Central Committee of the Chinese Communist Party, in order to increase economic growth and domestic demand.

“At present, our country’s economy continues to improve but the endogenous driving force is still not strong enough while domestic demand remains insufficient,” the politburo said in a statement after a meeting chaired by General Secretary Xi Jinping this past Friday.

“China’s economic transformation and upgrading is facing new obstacles while the promotion of high-quality development still needs to overcome many difficulties and challenges.”

“Attracting foreign investment should be placed in a more important position, and foreign trade and investment should be stabilized,” it said.

“It is necessary to help qualified free trade pilot zones and ports meet the requirements of international high-standard economic and trade rules so that they can carry out reform and opening up.”

The Shanghai government announced that it will enhance its financial services and promote foreign investors’ involvement in China’s financial markets, supporting Chinese technology, commerce, and maritime companies’ fundraising efforts.

According to media sources from last month, Biden will soon sign an executive order prohibiting US businesses, private equity funds, and venture capital funds from funding Chinese initiatives and businesses in the fields of microchips, artificial intelligence, quantum computing, biotechnology, and clean energy.

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