China's Anti-Espionage Laws Spooking Foreign Investors

The broadening of China’s anti-espionage law last Wednesday has prompted a key database of Chinese financial information to primarily cut off foreign firms.

Photo Insert: The database restrictions are part of a broader campaign to remove once-available government data from the internet.

The move follows a recent pattern of Beijing blocking access to critical business data, from patents to local yearbooks, and a series of raids on foreign firms—particularly those doing due diligence work.

Combined with other recent developments, this is bad news for foreign investment in China, James Palmer stressed in an analysis for Foreign Policy.

Last week’s amendments also expand the range of available legal excuses to arrest foreigners in the country.

A couple of prominent cases predate the changes—the detention of Australian journalist Cheng Lei and the recent arrest of Japanese executive Hiroshi Nishiyama—and that number may now grow.

Meanwhile, China has increased its use of exit bans, deployed primarily against Chinese citizens but sometimes against foreign businesspeople.

The database restrictions are part of a broader campaign to remove once-available government data from the internet. China has cut access to online sources including decisions from court cases and procurement documents.

Other resources, such as the China National Knowledge Infrastructure database, are now off-limits to foreigners. So why is China undertaking such aggressive measures even as it tries to woo back investors?

While the Chinese government is increasingly authoritarian and subject to Xi’s whims, it can also contradict itself. The prime movers for foreign investment are cash-strapped and debt-ridden local governments hoping to boost tax revenue and GDP figures.

Their interests may conflict with those of state security agencies. One theory is that the databases provided foreign businessmen with information about the wealth of Xi Jinping and his family.

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