Newsletter 163 - May 7, 2023
Welcome to the 163rd edition of Trade War.
China’s anti-espionage law poses serious risk to foreign companies. Beijing tightens access to business information. And authorities make supply chain inspections more difficult.
Global accounting firms are back in the crosshairs, with companies ordered to do more thorough security checks before hiring them. And Chinese firms try to hide their identity in global market.
Chinese tourists back in force traveling over the just-concluded May holiday but spending remained subdued. Jobless youth flood temples seeking solace. And Beijing censors online commentary on poverty and inequality.
And in Notable/In Depth
New report shows little progress on economic reform in China over last quarter. Apple’s Tim Cook says India’s burgeoning consumer market at a “tipping point. China’s workers ill-prepared for move to a more value-added manufacturing economy.
And the author of this newsletter discusses his book “The Myth of Chinese Capitalism” and the systemic discrimination against China’s hundreds of millions of migrant workers on The San Francisco Experience podcast
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Rising risks for foreign firms
China’s newly expanded anti-espionage law poses serious risks for foreign individuals and businesses, reports DW News’ William Yang.
The revised law which was passed by China’s National People’s Congress last week, expands the definition of spying to include cyberattacks on the state as well as on key information infrastructure, and gives new powers to Beijing during espionage probes.
“It allows authorities to gain access to data, electronic equipment, information on personal property and also to ban border crossings while carrying out an anti-espionage investigation,” writes Yang.
The expansion of the law shows growing suspicion in Beijing that foreigners could instigate a “color revolution” and will likely also be used against Chinese dissidents and civil society groups, says activist and legal expert Teng Biao.
"Foreign scholars like myself will now avoid going to China if we can, because things like comments on social media could all be viewed as evidence of committing espionage in the eyes of the Chinese government," says University of Tokyo China scholar Tomoko Ako.
The potential for the law to be used against foreign firms in China is fanning fears in the overseas business community, even as U.S. and Japanese companies have faced investigations, office raids and detention of local employees.
"We hope that we can have an environment here where the American businesspeople and journalists and academics can feel safe, that if they're operating here in China, they can do the jobs that they came here to do, and that they're not subjected to this kind of intimidation," U.S. Ambassador to China Nicholas Burns said Tuesday at the Stimson Center in Washington, D.C.
There is also a concern that the law might make it risky for foreign companies to do the kind of previously commonplace due diligence necessary when establishing joint ventures or signing contracts with Chinese firms.
"Foreign companies might no longer want to invest in certain Chinese companies as they can't figure out what businesses they are doing and how real they are," said Dexter Roberts, a senior fellow at the Atlantic Council's Indo-Pacific Security Initiative.
"Fewer and fewer foreign executives want to be based in China, especially if their businesses could be potentially sensitive," added Roberts.
The growing use of arbitrary exit bans has spooked foreign executives who fear they too might one day find themselves unable to depart China. According to Madrid-based Safeguard Defenders, 129 foreigners, including 29 Americans and 44 Canadians were subjected to exit bans between 1995 and 2019.
“A lot of the fund managers I know won’t go [to China] any more,” says Anne Stevenson-Yang, founder of J Capital Research.
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