By Olle Olsson Holmquist.

China’s expanded counter-espionage law (CEL) represents more than a domestic security measure – it serves as a legal mechanism for expanding state surveillance, controlling information flows, and exerting extraterritorial pressure on foreign governments, businesses, and Chinese dissidents. Through an analysis of legal provisions and international legal norms, the CEL is shown to function as a geopolitical tool with global influence rather than an internal security measure.

I. Overview of the Revised Counter-Espionage Law

A significantly revised version of China’s CEL was formally passed on 26 April 2023 and implemented on 1 July 2023. The law’s scope was expanded by widening the notion of espionage from “state secrets” to any information related to national security, reflecting Beijing’s growing concern about preventing foreign influence [1]. While the previous version of the law, which was initially implemented in 2014 and supplemented in 2017, was narrowly aimed at preventing unauthorised access to classified government information, its updated language targets any act considered to undermine “key areas related to national security” by utilising vague terms such as “items of concern to national security” and “other documents, data, materials, or items” [2]. This textual overhaul allows China’s national security agencies substantial discretion in their prosecution of alleged espionage activities [3].

The revised law’s international reach allows Chinese authorities to prosecute activities linked to espionage by companies or other organisations conducted outside the borders of China, given that the relevant perpetrator(s) are within Chinese territory and their actions are deemed harmful to China’s “national security or interests” [2]. The increased compliance risks primarily concern major corporations, but journalists, academics, and researchers who operate in or engage with China are also vulnerable, as even standard data sharing may fall under the broad umbrella of potential espionage [1][4].

II. Understanding the New Counter-Espionage Law

Historical Background

Beijing introduced its first separate CEL in 2014, primarily aiming at preventing theft of state secrets and detaining foreign intelligence operatives [5]. The law was partially updated by a set of provisions in the 2015 National Security Law, which widened the notion of “national security” to include technology, economics, and culture [6]. This was followed by the 2017 National Intelligence Law, which requires cooperation with intelligence services and emphasises intelligence sharing [7]. Since then, by implementing interconnected legislation, the Chinese government has expanded the boundaries of “espionage” beyond its original focus on intelligence leaks and covert operations by foreign powers to a variety of activities. What Beijing deems “espionage” and “potential threats to national security” now includes sharing business information, academic research, and managing non-governmental organisation projects [1][8]. The reasoning behind the Chinese government’s expansion of power and control over entities and individuals possessing information that the state deems sensitive lies in its perceived vulnerability to external manipulation of economic and social institutions [3]. 

Key Legal Provisions

The stipulation that any foreign or domestic individual or organisation can be investigated if suspected of endangering China’s national security is among the most significant revisions of the law [4]. The new notion of “espionage” is sufficiently broad to indirectly include routine business operations, data transfers, political reporting, and collaboration with international non-governmental organisations [9]. 

Other provisions grant China’s state security agencies expansive authority to conduct physical and digital searches and seize electronic devices with minimal judicial oversight [10]. China’s broader push for control over data and intelligence to keep critical information under state oversight further includes requiring organisations to cooperate with government investigations and hand over data or internal records upon request [2].

Comparison with Espionage Laws in Other Countries

While the legal frameworks of many states contain statutes regarding counter-espionage, China’s legislative approach is distinguished from others by its unusually broad scope. For instance, the U.S. Espionage Act primarily revolves around unauthorised possession or distribution of information regarding national defence, and does not, by principle, extend to commercial activities or academic research [11]. Russia’s Foreign Agents Law is similarly broad but primarily imposes the requirement that entities receiving foreign funding must register as “foreign agents”, rather than discretionarily defining the operations of businesses or non-governmental organisations as potential espionage-related threats to national security [12]. In contrast, China’s revised CEL functions as a security instrument, placing various forms of foreign affiliation or data handling under potential prosecution through the use of a legal apparatus with little structural protection [13].

III. International Legal and Political Implications

The expanded version of China’s CEL has legal ramifications for entities beyond China’s borders, thereby raising questions about its role with regard to international law. With extended jurisdiction over foreign nationals and entities, China could violate human rights principles through the enforcement of the CEL, compromise global trade, and undermine diplomatic conventions [14]. 

Legal Conflicts and Human Rights Concerns

By imposing the CEL, China may contravene established human rights protections, which poses a concern under international law, given its status as a signatory, though not a ratifying party, to the International Covenant on Civil and Political Rights [15]. Under the revised version of the CEL, China permits broad surveillance, detention, and prosecution of foreign nationals for vaguely defined “espionage” acts that potentially violate fundamental rights, such as freedom of expression, privacy, and due process [16]. These provisions, which have been criticized for their breadth and potential vagueness [2], create an environment of legal uncertainty and impose restrictions to individuals and organisations engaging in information exchanges related to academia, business operations, or other previously fully legitimate activities [1].

The principle of state sovereignty, widely regarded as a bedrock of the United Nations Charter and international law, may be undermined by the CEL’s cross-border jurisdiction. Traditionally, most states have been highly reluctant to prosecute criminal acts beyond their borders unless the relevant activities pose direct threats to national security. However, the revised version of the CEL allows Chinese security authorities to investigate and domestically prosecute foreign persons for activities conducted outside China if those activities are deemed as threats to China’s national interests. Exercising criminal jurisdiction through ambiguous legal provisions undermines the lawful norms of cooperation and peace-building emphasised in international law, thereby raising concerns about reciprocal legal actions [17].

Challenges to WTO Rules and Global Trade

The broad scope of the CEL may, in addition to its potential human rights violations, collide with China’s obligations as a member of the World Trade Organisation (WTO). China risks impeding the WTO’s rules – particularly Articles I (Most-Favoured-Nation Treatment), III (National Treatment), and XI (Elimination of Quantitative Restrictions)[18] of the General Agreement on Tariffs and Trade, as well as Articles XVI and XVII of the General Agreement on Trade in Services[19] – which, by principle, aim to prevent discrimination against foreign businesses, including criminalisation and prosecution of an extensive range of commercial or research activities, applicable to Beijing’s labelling of “alleged espionage” [20].

Under the General Agreement on Tariffs and Trade, Article I (Most-Favoured-Nation Treatment) bans any member of the WTO from handling relations with foreign businesses differently based on their national origin. If China were to enforce the CEL selectively with respect to foreign firms vis-à-vis domestic firms, such an action could be perceived as discriminatory. Comparably, Article III (National Treatment) states that foreign and domestic firms shall receive equal treatment by Chinese authorities when partaking in China’s internal market [18]. In the case that Beijing were to prosecute any foreign entity engaging in standard commercial activities, presumably similar or identical to those engaged in by Chinese firms, and justify that prosecution by referring to the CEL, Beijing would risk breaching its obligations to the WTO.

Additionally, foreign firms being discouraged or deterred from entering the Chinese market as a result of vague or wide-ranging espionage allegations is effectively a trade restriction without formal tariffs – a prohibited practice under Article XI, which proscribes quantitative restrictions and non-tariff barriers on imports and exports [18]. Furthermore, Article XVI (Market Access) and Article XVII (National Treatment) states obligations with regard to services under the General Agreement on Trade in Services, relevant in the case of China’s CEL constituting legal uncertainty or operational barriers for foreign consultancy, legal, or data analysis firms, given that Chinese firms of the same commercial nature do not face the same challenges [19]. In that scenario, China would likely fail to follow its commitments to the WTO, as their practices would effectively discriminate against open access to its services markets.

The potential hindrance to the WTO’s objectives is evident when corporations in China find themselves under investigation for routine data gathering or market research, resulting in significant disruptions to their international business flows [21]. Such interference could, by a formal investigation, be interpreted as non-tariff barriers to trade, directly violating WTO principles of fair competition and market access. However, merely launching an investigation on the matter would be subject to unpredictable outcomes and potentially risk compromising dispute resolution systems, as businesses may fear that legal arbitration could be overshadowed by Chinese national security concerns [22].

Extraterritorial Application

The expanded CEL reflects Beijing’s pursuit of strategic dominance. With China’s disregard to human rights lawyers and political dissidents who report threats and coercion to return, even attempting to gather information about these alleged abuses could by deemed a subversive matter by Chinese authorities; Beijing leverages its expanded legal framework to prevent foreign interference and gains power beyond its national borders [23]. The legal jeopardy’s reach may thus extend beyond the perimeters of China and threaten the principles of state sovereignty [24].

However, the CEL’s divergence from jurisdictional norms may highlight a potential weakening of those international institutions designed to encourage and facilitate international cooperation, particularly regarding the rule of law and multilateral dispute resolution. China’s expanded legal frameworks, however, could be interpreted as a development of its identity in the context of international politics: broadening the definitions of “national security” reflects a view in which foreign influence is intrinsically suspect or dangerous, thus reinforcing an “us versus them” paradigm.

China’s revised CEL therefore functions as more than a domestic counter-espionage measure: with its extraterritorial reach and deviant role with respect to established international norms, it operates as a powerful geopolitical instrument which can interfere with foreign relations, economic engagements, and reshape the global discourse on international security.

IV. Global Repercussions and Strategic Use

The 2023 revision of China’s anti-espionage law has raised worldwide concerns among foreign firms and organisations, as the broad scope of the law may serve as a tool to enable and facilitate international crackdowns [21]. 

Business Risks and Economic Fallout

Major corporations, including American technology giants with connections to Chinese supply chains, have, as a consequence of the revised CEL, suffered operational restrictions. Corporate practices that had previously been routine, such as market research and due diligence, are now potentially subject to being classified as espionage, causing companies to scale back their business operations [25]. Some multinational firms have responded to the law’s revision by limiting certain business activities and adjusting their strategy with regard to Chinese manufacturing. Such measures could consequently reshape global trade and interrupt established supply chains [26].

Implications of the CEL may furthermore extend into pharmaceutical and regulatory domains. For instance, German Good Manufacturing Practice (GMP) inspectors have, in some cases, reduced or suspended formal visits to pharmaceutical facilities in China due to concerns of routine data gathering being subject to scrutiny by Chinese authorities under the expanded anti-espionage framework. Inspectors’ fears concern legal repercussions and travel restrictions, in case their work is deemed by officials as too strongly aligned with vaguely defined “espionage” provisions. The effect on pharmaceutical oversight could therefore contribute toward shortages of medical supplies across the EU, due to its partial dependence on China’s manufacturing of antibiotics and other essential medicines [27].

The European Union Chamber of Commerce in China reported, through its annual position paper in September 2024, that foreign companies with business activity in China were hitting a “tipping point” due to “complex data, cybersecurity, and anti-espionage laws”, causing organisations to reduce investments and operational activity. The paper explicitly mentions a 29 percent year-over-year decrease in foreign direct investments to China during the first half of 2024, indicating corporate withdrawal from the region due to its commercial climate. This decline reflects the growing uncertainty of China’s regulatory environment and increasing enforcement of security-related legislation [28].

Besides directly impacting corporations, organisations, and individuals, the CEL increases pressure on foreign governments. Western journalists and non-governmental organisations have reported harassment, detentions, and expulsions from China due to allegedly posing threats to national security [29]. For instance, Australian journalist Cheng Lei was detained in 2020 for alleged distribution of state secrets and released in late 2023 after diplomatic interference by the Australian government [30]. Comparably, a Chinese court sentenced journalist Dong Yuyu in November 2024 to seven years in prison on charges of espionage linked to his interactions with foreign diplomats and academics, highlighting the expanded CEL’s potential threat to freedom of the press [31]. Thus, the imposition of the CEL undermines free reporting and efforts to protect human rights – concerns which have influenced allied nations in Five Eyes, NATO, and the EU to rethink intelligence-sharing, reflecting the shared concern of China’s willingness to prosecute alleged espionage as a means of leverage in international politics [32].

Case Studies: Raids and Corporate Targeting

Several major corporations suffered significant setbacks under the initial and revised versions of the CEL. In March 2023, the Beijing office of Mintz Group, a New York-based due diligence firm, was raided due to suspected “illegal business operations”. Authorities detained all five Chinese nationals working at the office and later fined the firm $1.5 million for unlawful work, according to the Beijing Municipal Bureau of Statistics [21]. Thus, research on Chinese companies – a common practice in Mintz Group’s due diligence routines – can be perceived as espionage, and thereby legitimise such raids. 

In April 2023, just as the revised law was formally passed, Chinese authorities targeted the American management consulting firm Bain & Company’s offices in Shanghai. Police questioned staff members and seized electronic devices, but did not make any charges public, though the mere raid represents a clear suspicion of breach of national security [33]. 

Beijing’s scrutiny of even routine market analysis was further reinforced by the raid of Capvision’s Chinese offices in early May 2023. The firm, an expert network service operating globally, found itself under potential prosecution for allegedly providing foreign clients with business intelligence deemed sensitive by Chinese authorities, who referenced the revised CEL to justify their investigation [34].

In October 2024, McKinsey dismissed nearly 500 of its employees in China, Hong Kong, and Taiwan, ended projects with clients associated with the state, and judicially isolated some of its operations in China as a response to “heightened geopolitical tensions and growing security and regulatory risks”. After having advised a variety of companies in China, including state-owned firms such as China Construction Bank and China Telecom, McKinsey has in later years diverted from providing counsel to clients with connections to the state. The U.S.-based consulting firm has also advised its senior management to be cautious when working with state-linked businesses and matters that Beijing deems to require discretion [35]. 

Such incidents underscore the legal uncertainty that foreign corporations face in China under the revised CEL. Firms responding to the law by restricting their operations in order to avoid allegations of breaching national security – and thus minimise legal exposure – may thereby entail economic implications in the form of limiting already established business networks [25]. 

V. International Responses and Strategic Countermeasures

Foreign Policy and Legal Reactions

In response to China’s long-standing use of state-backed industrial espionage, Western governments are reshaping security and investment regulations. For instance, the United States is amending the functions of the Committee on Foreign Investment in the United States (CFIUS) to more accurately examine and potentially block incoming Chinese investments in various sectors [36]. Similarly, the European Union is overseeing its Foreign Direct Investment Regulation (FDI) to address technologies that Beijing may deem national security threats [37]. Comparably, other state-level discussions revolve around sanctioning entities associated with China’s Ministry of State Security [38]. 

These responses reflect a Western consensus that China’s expanded CEL poses a risk with regard to the global economy and national security [39]. The U.S Treasury partly responded to the imposed CEL by interfering with American investments in Chinese technology industries linked to China’s military, while the CFIUS commenced discussions revolving around intensifying investment screenings and other regulatory measures [40]. Meanwhile, indictments against agents reportedly being compensated by China’s Ministry of State Security for conducting cyberattacks against U.S security infrastructure indicate an escalation in pressure [41]. These actions, however, could imply a weakening of diplomatic relations and complications regarding multilateral collaboration on related issues, such as trade agreements. 

VI. Rethinking Espionage and Global Norms

China’s revised CEL is not simply a domestic tool used to preserve state secrets and reinforce national security – it serves as a powerful legal instrument that extends beyond Chinese borders [39]. The law utilises broad definitions and grants Beijing the authority to target foreign businesses, journalists, academics, and researchers, threatening them with prosecution if they fail to comply with Beijing’s rules [1]. Consequently, it challenges international norms and boundaries of international governance – especially in relation to the West [14].

Entities with connections to China’s Ministry of State Security are subject to sanctions, reflecting Western counteractions to what might be perceived as legal overreach [38]. Yet, retaliation poses a threat to established diplomatic relations and potentially endangers cooperation in global trade [39]. At a corporate level, many firms feel the need to reshape business operations being conducted in China, as the threat of being prosecuted or put under scrutiny by Beijing increases, whilst Western businesses are raided and prosecuted for alleged espionage [42]. Journalists may be equally vulnerable, given that their pursuit of truth is a direct conflict with China’s aim to guard state secrets and prosecute those who research subjects connected to national security [29].

Conducting lawfare in order to achieve politically strategic goals implies utilisation of legal systems and principles to suppress opposing parties and shift power dynamics. Typically, laws are weaponized to impact geopolitical narratives, compromise those perceived as enemies, and, as especially relevant in the case of China’s CEL, legitimize coercive state actions [43]. China’s continuous revisions and expansions of its CEL can, through its implementation and practical application of ambiguously defined legal frameworks, be understood as an example of state-sponsored lawfare. Sharply defined cases include the raids of Mintz Group, Bain & Company, and Capvision, and detentions of journalists conducted with the purpose of controlling political narratives.

China’s international influence grows with its legal frameworks, which serve as a projection of its power. However, the law’s message is ambiguous: Beijing is prepared to wield its jurisdictional instruments to justify potential legal overreach against individuals and corporations, while such measures redefine the intersection between enhancing national security and global order [39].

Edited by Justine Peries.

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[Cover Image] Staff Sgt. D. Myles Cullen (USAF), Public domain, via Wikimedia Commons. https://commons.wikimedia.org/wiki/File:Chinese_honor_guard_in_column_070322-F-0193C-014.JPEG