Could Beijing's anti-spy campaign dampen its reopening efforts?

Chinese state media cast the spotlight on a Chinese consulting firm with national security implications on 8 May, setting the stage for a full-scale investigation into the consulting industry, and sparking spying fears across the industry.

According to reports, China's national security agencies and relevant departments launched enforcement actions against leading Chinese consulting company Capvision, with surprise raids on its Suzhou branch office, as well as simultaneous enforcement actions in Shanghai, Beijing, Shenzhen and other locations.

Capvision's website shows that the company was founded in 2006 and has headquarters in New York and Shanghai, and specialises in providing expert consulting services to clients of various industries.

The company is well known in the investment industry, and many professional investors and entrepreneurs rely on it for information when making business decisions. Capvision acts as an "intermediary" to connect clients with experts from all walks of life, with its extensive expert network - the company's website claims a network of 450,000 experts.

It is precisely this industry expert consulting model that has plunged this company that operates inside and outside of China into a storm of anti-espionage efforts.

According to the CCTV programme "Focus Interview: Malicious Consulting" (焦点访谈：别有用心的咨询), Capvision's expert sources are not as straightforward as they seem. The company specifically selects influential experts in key areas and important industries such as domestic policy research, national defence and military, finance and currency, technology, energy and resources, and medicine and health.

The report said one expert surnamed Han who worked for a state-owned enterprise received more than 100 consultations through Capvision, over 60% of which were overseas consultations. He downloaded 5,000 files from the company's intranet, including one classified-level state secret, two confidential-level national secrets, 13 pieces of intelligence and 18 corporate secrets.

Another expert involved surnamed Lei worked at a key military industry enterprise and was suspected of leaking sensitive military industry information to overseas parties and providing illegal access to national secrets. Lei said that Capvision's clients had asked him about the inventory of a certain military aircraft model.

The report said the national security agency's investigation revealed that Capvision had accepted a large number of consulting projects from overseas companies in sensitive industries in China, "some of which have close ties to foreign governments, military, and intelligence agencies".

This rare report by state media on anti-espionage efforts in the consulting industry is believed to be aimed at warning the entire industry against dubious activities. The report also harshly criticised the consulting industry, noting that some Chinese consulting companies lack awareness of national security and frequently walk the line for the sake of economic benefits, causing significant harm to national industrial development and economic security, and ultimately becoming accomplices of foreign espionage, bribery, and intelligence collection.

In fact, over the past few months, it was frequently reported that the offices of foreign companies in China have been raided or that staff were being detained, including US corporate due diligence firm Mintz Group, consulting firm Bain & Company, and Japanese drug firm Astellas Pharma. It seems like a sweeping anti-spy campaign is looming.

The objective reality facing China now is that of a severe external environment. Even if national security issues have not taken precedence over economic development, they are already on par with economic issues. Amid growing tensions between China and the West, with China and the US possibly slipping into a protracted fight, China and other countries will certainly continue to spy on each other, which would lead Beijing to be more careful about protecting state secrets. Even in the US, national security issues are also given high priority, with national security being the reason why the US has been constantly sanctioning China in the tech sector and other fields of China-US competition.

But when it comes to national security issues, if clear definitions and predictable red lines are not drawn to ensure that anti-spy enforcement operations are transparent and legitimate, it could easily result in a chilling effect. Beijing's recent moves and the approval of its updated anti-espionage law last month have already sent a shiver down the spine of foreign companies and foreigners in China.

China's revised anti-espionage legislation now categorises conducting cyberattacks and collaborating with espionage organisations and their agents as espionage activities. It has also expanded the areas of concern that could become targets of spying, and strengthened the law enforcement agencies' authority to examine and collect data, summon, inquire about asset information, and prohibit entry or exit. Overall, the scope of the crackdown and the authorities' enforcement powers have been expanded, but a few core concepts in the anti-espionage law, such as national security, do not have clear definitions.

Some people thus worry that the enforcement of anti-espionage operations will be too all-encompassing and lacking in transparency. Will the anti-espionage law and national security issues become a convenient excuse for serving Beijing's needs, such as its diplomatic needs and so on? After all, a few years ago following the Meng Wanzhou incident, two Canadian citizens had been detained by Chinese authorities on suspicion of spying.

China hopes to send a clear message that it will not go soft on attempts to steal the country's state secrets. Faced with Beijing's strict anti-espionage campaign, foreign enterprises in China have to be extra careful not to cross the red line of national security. While all countries have the right to protect their country's state secrets, this anti-espionage campaign still makes people somewhat uneasy. After all, what China needs to do now after reopening its doors following the pandemic is to show openness and rebuild the confidence of the outside world.

This article was first published in Lianhe Zaobao as "北京谍影重重".

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