China passed revisions to an already stringent state secrets law, broadening the scope of the type of information that would be considered a national security risk in the world’s second- largest economy.

The changes elevate the risks for foreign businesses operating in the country. Over the last year, China has targeted consultants and business executives in espionage cases as part of a push to limit the spread of information sought by investors and
foreign companies.

The amendments to the state secrets law, which were passed by China’s top legislative body on Tuesday and go into effect in May, include a new legal concept called “work secrets.” It is defined as information that is not an official state secret, but “will cause certain adverse effects if leaked,” according to the law’s text.

“The law is vague and the definition of state secret so broad that it could include anything that the party-state decides it should,” said Diana Choyleva, chief economist at Enodo Economics, a London-based research firm focused on China. “It will also further complicate life for foreign firms and their employees based in China.”

Choyleva said many companies will be trapped in a state of “paralysis” while they wait to see how China applies the new provisions in the law.

It is the latest example of the country’s heightened vigilance of state security under the leadership of Xi Jinping. Over the last few years, China has progressively fortified its national security and data-sharing laws, while warning about the risks of spying under the cloak of business.

But the strengthening of China’s national security laws has rattled many foreign businesses and investors. Many of the changes exercise unclear and expansive criteria of what would constitute a national security risk.

The crackdown has amplified the challenges of investing in China at a time when foreign direct investment in the country has fallen to its lowest levels in three decades, as companies are increasingly unwilling to endure the trade-offs of operating in China.

Jens Eskelund, president of the European Union Chamber of Commerce in China, said the changes to the state secrets law came a week after the country’s cabinet, the State Council, said that one of the year’s priorities was to attract more foreign investment by shoring up investor confidence.

“The scope of issues deemed ‘sensitive’ seems to be constantly expanding, which makes it more difficult for companies to access information necessary for making investment decisions related to their China operations,” he said. The state secrets law was first passed in 1988 and then amended in 2010 when China imposed tougher requirements on Internet and telecommunications companies to cooperate with the police, state security officials and prosecutors in investigating leaks of state secrets.

China’s ruling Communist Party determined the law needed updating because of advances in science and technology that created “new problems and challenges” in maintaining confidentiality, an official at the National Administration of State Secrets Protection told state media.

New York Times News Service