China’s New Anti-Espionage Laws Make It More Challenging For Foreign Firms To Invest, Says Leading Intelligence Provider

Beijing, China financial district cityscape.

BEIJING SENDING MIXED MESSAGES TO FOREIGN INVESTORS ACCORDING TO KCS GROUP EUROPE

Investors operating in China are facing a more challenging environment after lawmakers in Beijing passed new anti-espionage laws at the end of April 2023, according to London-based intelligence firm KCS Group Europe (KCSGE).

A recent clampdown on foreign-owned consultancies operating in China is causing concern. The consultancies and business research groups provide financiers – from hedge funds to private equity firms – access to industry experts and investigators who have been able to supply valuable corporate information in the past.

 

KCSGE CEO Stuart Poole-Robb says: “China is effectively cutting off international access to various databases involving corporate registration, patents and even official statistical yearbooks.

“The government in Beijing postponed the release of several major economic reports last year, including GDP figures.

“Then in February 2023, the government urged state-owned firms to phase out using the four big international accountancy firms – PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte – citing concerns about data security.

“At the end of April, China’s lawmakers passed new anti-espionage laws, which banned the transfer of any information relating to national security and broadened the definition of spying.”

 

The official state press agency Xinhua published the law, which appears to classify documents, data, materials and items related to national security and interests on the same level as state secrets. It also categorises cyber attacks against state organs as espionage. The new laws come into force in July.

With tensions between China and the US growing, American consultancies are under the spotlight. Authorities have targeted global companies Bain & Co, the Mintz Group and Capvision in recent weeks. Police have visited the offices of Capvision and detained local staff at the Mintz Group.

 

Poole-Robb adds: “The authorities in Beijing are sending out mixed messages. Following repeated Covid lockdowns, they stated the economy was open to the global market and foreign investment.

“However, these latest events indicate that there is a heightened sensitivity around data and information. This will make it less attractive for foreign firms to carry out due diligence and make investment decisions, particularly where it’s related to state-owned enterprises.

“Currently, the government in Beijing says some foreign consulting firms are ignoring national security in seeking market share and profit. However, it has not defined what it means by national security, creating considerable uncertainty for potential investors.”

About Lisa Baker, Editor 2308 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.