1. Chinese National Security Laws Hinder Foreign Companies’ Operations in China
- Author:
- Martin Purbrick
- Publication Date:
- 10-2023
- Content Type:
- Journal Article
- Journal:
- China Brief
- Institution:
- The Jamestown Foundation
- Abstract:
- Investigations into alleged misconduct and criminality by companies are to be expected, and welcomed, in any country. However, the problems facing foreign companies in the People’s Republic of China (PRC) depart from normal legal checks and balances. The lack of separation between the judiciary and the state, and the uncertainty around China’s interpretation of the “rule of law,” is a risk factor for companies doing business there (See: China Brief, September 8). In addition, “state secrets” in the PRC are defined widely in relation to national interest. Consequently, a foreign company can inadvertently breach the law by obtaining and using commercial data. This week the US Department of Commerce’s Bureau of Industry and Security (BIS) announced updated export controls on advanced computing semiconductors, semiconductor manufacturing equipment, and supercomputing items to the PRC (BIS, October 17). Foreign companies doing business in the PRC are likely to face continued uncertainty as a consequence. The response from the PRC was swift, stating that the United States has constantly “overstretched the concept of national security” and resorted to “unilateral bullying” (China Daily, October 18), which suggests that there is a risk the PRC will take retaliatory measures against foreign companies. Western companies involved in the PRC have long understood that when investing in China they must lose a little bit of money in the short term to win a lot of money in the long term. Doing business in China has always been complex, but with the continued expansive approach to national security, it may now be increasingly untenable (See: China Brief, September 22). After three decades of huge investment in the PRC by international companies, there are growing concerns that the growing emphasis on national security is harming the confidence of overseas investors. As the European Union Chamber of Commerce in China reports, “the politicisation of business, and ambiguous laws and regulations…increases risk for companies operating in Chinas” (EU Chamber, September 20). In recent weeks, this ambiguity has been exacerbated by the growing number of “exit bans,” whereby PRC authorities forbid specific business executives at international companies, such as Kroll and Nomura, from leaving the country (Stratfor, September 29).
- Topic:
- National Security, Law, and Business
- Political Geography:
- China and Asia