As reports emerge that China is ramping up its official scrutiny of foreign firms operating in the country, it can be a retaliatory move against foreign entities to allegations of Chinese espionage abroad, according to former senior intelligence official and author Nicholas Eftimiades.
The revision has expanded the definition of espionage, making it broader and vaguer, which increased the range of information and resources that Beijing considers relevant to national security.
Eftimiades said that with this legislative change, the ruling Chinese Communist Party (CCP) sent a chilling message to foreign companies in China.
He pointed to a March raid of the Beijing office of Mintz Group, a due diligence firm headquartered in New York. Five Mintz employees—all Chinese nationals—were reportedly detained on suspicion of engaging in illegal business operations, and the regime confirmed those charges.
Due to the arrests, Mintz closed its sole office in China’s mainland. The company’s closure is a setback for China’s global business community, which depends on it for trusted international corporate investigations as part of hiring, transactions, and litigation in China.
Eftimiades also pointed to the arrest of an executive at Japan’s Astellas Pharmaceuticals’ Beijing office in April over alleged espionage.
“I think this is their version of gearing up for either response or retaliation to all the accusations of Chinese espionage globally,” he said.
Growing Geopolitical Tension
As the author of “Chinese Espionage Operations and Tactics,” Eftimiades noted that Beijing has ramped up its coercive actions by targeting foreign firms despite its commitment to greater openness and desire to attract more foreign investment.“No matter what happens in the world, we will always adhere to reform and opening up,” Li stated in his keynote speech on March 30 at the annual meeting of Asia’s top leaders.
Li also stated that new measures will be introduced to expand access, optimize the business environment, and guarantee project implementation so that all countries can share the “dividend” of China’s development.
Yet Eftimiades attributed the changing attitude of the regime to the growing geopolitical tension between China and other powers, including the United States.
“So I think that’s the key factor here, as the geopolitical tension ratchets up, it’s gonna put foreign companies in an ever more tenuous position operating in China,” he said.
“We haven’t had the geopolitical tension that we have had now, in recent years, as the United States starts to respond to the acts that China has been doing for some period of time,” he added.
The recent uptick in coercive actions against foreign companies also manifests how Chinese leader Xi Jinping furthers his consolidation of political power, according to the expert.
The move leads to increasing foreign business and investment withdrawal from China.
“Xi Jinping is solidifying political power. He’s already done that. But he is seeking to control more of Chinese society. And as you know, you squeeze your fist, people slip out through your fingers,” he said.
“And so businesses are getting out, people are getting out. I think you see a large part of the movement of money trying to leave China, not by elites. All of these things are a function of Xi Jinping’s consolidating power,” he added.
