Singapore recently hosted several large-scale forums and gatherings, during one of which I met an old friend who was curious about the current situation in Beijing. He lamented that he was no longer able to visit China — a few years ago it was because of the pandemic, but this year, it was because the firm he worked at did not allow him to step into China.
Taken aback, I thought I misheard him: “Your company is forbidding you from going to China?”
Vague definition, high risk
I was briefly flummoxed, but I recalled that my friend worked at a multinational corporation (MNC). He was in charge of researching government relations, including tracking and analysing the political and economic situation in China, to assess the risk of long-term and large-scale investments in China. This was initially considered a professional and regular role, but since March this year, it has become a high-risk job under the cloud of Beijing arresting spies and stepping up efforts to prevent the leaking of secrets.
The Chinese government promulgated the revised anti-espionage law in July, which would “significantly expand the scope of activities that can be considered espionage” and which specified that “documents, data, materials or articles relating to national security and interests” would be under protection. It also enhanced the administrative authority of officials in an investigation, such as the issuing of summons and travel bans.
At the time, many voices raised concerns that this revision could have a chilling effect that would impact China’s ability to attract foreign investment, and that China was proactively “decoupling” from international corporations.
China’s clampdown on the protection of state secrets comes without clear demarcation as to what information and data would be considered as “relating to national security and interests”.
My friend’s experience shows that the “chilling effect” is not an exaggeration. MNCs are feeling the pressure and are rushing to put in place various regulations to protect their employees.
Indeed, the anti-espionage law is a legal deterrence. However, the bigger shock for MNCs occurred in April, when employees of US consultancy firm Bain and Company’s Shanghai office were questioned by the police during an unannounced visit. Prior to that, five Chinese employees of US due diligence firm Mintz Group were also detained, and its Beijing office was shuttered.
Objectively, with China-US tensions rising, international investors should conduct even more thorough assessments, which could mean more crucial information being collated by research consultants. Under these circumstances, more people would be at risk of being investigated by the authorities, as China’s clampdown on the protection of state secrets comes without clear demarcation as to what information and data would be considered as “relating to national security and interests”.
Mutual mistrust and fear
Even recently, there have been reports of employees of foreign firms in China being barred from leaving the country. According to the Wall Street Journal, a high-level executive from US risk advisory firm Kroll based in Hong Kong was prohibited from leaving the mainland in July, to assist the authorities with investigations on a case from a few years ago.
A senior investor of Nomura Securities, also based in Hong Kong, likewise reported to his firm recently that he had been prohibited from leaving mainland China.
My Singaporean friend does not work in consulting or banking, but his company made a list of top executives who were not allowed to visit China, to prevent them from potentially going through the predicament of being barred from leaving China. Furthermore, the firm also split several departments into those that have dealings with China and those that did not, in a bid to mitigate risk.
In light of the current situation, how would this major MNC view China’s investment prospects, and what investment strategy would they adopt for China? The writing is on the wall.
... such self-imposed restrictions on both sides reflect the mutual mistrust and even fear between China and the outside world...
Coincidentally, I recently found out that a Chinese expert who holds a senior position in China has been put on an “exit ban”. While this senior executive did not land in any trouble, the Chinese government barred his exit from the country to protect and prevent him from being kidnapped abroad, lest a repeat of the detention of Huawei CFO Meng Wanzhou in Canada a few years ago.
Chinese officials believe that under the current international situation, the risk of important people being detained outside the country ought to be seriously dealt with.
Executives from foreign companies avoid entering China while Chinese experts are barred from leaving the country — such self-imposed restrictions on both sides reflect the mutual mistrust and even fear between China and the outside world, hindering exchanges and business cooperation between both sides.
High walls accelerating decoupling
In fact, even ordinary people-to-people exchanges between China and foreign countries have become increasingly inconvenient in recent years.
Under the requirements of the comprehensive strict governance of the party and the strict management and supervision of cadres, China has adopted strict regulations on cross-border travels of civil servants — if not for official reasons, cadres at the division level and above must obtain approval from public security organs and units to leave the country for private purposes.
Meanwhile, foreigners who visit China to sightsee or do business would find it extremely difficult to book tickets or use ride-hailing services without a mainland phone number, making it a challenge to move around.
The Chinese government’s inaction in resolving these seemingly insignificant inconveniences conveys the message that they are not too concerned about the number of foreigners travelling to China for cultural or business exchanges.
Although China and the US each claim that they do not intend to decouple from the other, decoupling is certainly happening, and both sides are in fact accelerating the process in their own ways.
Where have the foreigners in Chinese cities gone? Since the lifting of anti-Covid measures this year, the exchanges between China and foreign countries did not quickly return to normal like what the outside world had expected but instead became bleaker. Quoting official statistics, the South China Morning Post reported that Chinese travel agencies received 477,800 foreign tourists in the first six months of 2023, only 5.58% of the total from the same period in 2019.
This is just the number of tourists that travel agencies had received and not the total number of inbound travellers overall. Nonetheless, the number of foreigners in China is inevitably decreasing. Apart from the anti-espionage law, the decline in tourists is also affected by the speed of tourism recovery after the pandemic, the cumbersome visa application process and hostile East-West relations.
While some of these situations cannot be controlled by China alone, some can indeed be improved with China’s efforts. Although China and the US each claim that they do not intend to decouple from the other, decoupling is certainly happening, and both sides are in fact accelerating the process in their own ways.
While China has erected high walls in information and people-to-people exchanges, the US has done the same in the field of science and technology. The partial decoupling of East and West will continue to evolve for some time, and there is no hope of a reversal for now.
This article was first published in Lianhe Zaobao as “当外国人减少踏足中国”.