China tightens Counterespionage Law - Risk for Audits and Inspections?

On 26 April 2023, the People's Republic of China passed a revised Counterespionage Law, which came into force on 1 July. Compared to the previous version (in force since the end of 2014), the new version expands the government's counter-espionage powers and emphasises the role of the public in this task.

The list of espionage activities has been moved from the last chapter of the old law, "Supplementary Provisions", to the first chapter of the revised law, "General Provisions", and expanded to include the following point, among others:

"Stealing, prying into, purchasing, or illegally providing … other documents, data, materials, or items related to national security and interests ..." (newly added words marked in bold).

The revised law also aims to sensitise the public to espionage risks and thus prevent espionage at an early stage. It explicitly obliges all citizens and organisations to support and promote state counter-espionage (Art. 8) and stipulates that all organisations in the country must bear great responsibility for their part in counter-espionage (Art. 12, para. 1), non-compliance with which can have serious consequences for both the organisations and those responsible (Art. 56).

Article 27 authorises the national security authorities to summon persons who violate this law and interrogate them for up to eight hours. This period may be extended to up to 24 hours in complex cases where administrative detention may be applied or a crime is suspected.
Article 29 authorises the national security authority to obtain access to information on the property of espionage suspects under certain conditions.

Espionage suspects may be prevented from leaving the PRC by order of the national security authorities at provincial level or higher. (Art. 33, para. 2.) This provision also applies to foreigners.

Risk for Audits and Inspections?

The People's Republic of China has had such laws for some time, but they have now become more specific. There are now EU-GMP inspectorates that have unofficially suspended their inspections in China due to the certain legal uncertainty. Some inspectors are not travelling for personal reasons. Considering that most GMP certificates will probably only be valid until the end of 2024 due to the end of measures and flexibilities in the wake of the Covid-19 pandemic, there is a risk that the current medicine supply shortages might get worse. However, the risks for auditors from the pharmaceutical industry have of course also increased.

What do the official bodies think?

The US National Counterintelligence and Security Center states that the law has the "potential to create legal risks or uncertainty for foreign companies, journalists, academics, and researchers." China's Ministry of State Security (MSS), however, countered that this newly added provision only targets "illegal acts" and not companies that abide by PRC laws and provide normal services.

All in all, this is currently a challenge that cannot be solved with legal certainty. It will certainly not be the case that all auditors or inspectors will now be arrested. But the risk has increased. On the other hand, the Chinese have just suspended the visa requirement for some countries in order to boost the economy.

Source: Publications of the US Library of Congress