Regarding espionage, the legislation that is in force only covers offenses concerning State secrets. However, the version revised by the authorities will cover “all kinds of documents or materials having a link with national security and the interests of the State”, underlines the Japanese magazine Nikkei Asia. (Photo: 123RF)

GEOPOLITICAL ANALYSIS. Doing business in China is becoming increasingly risky for executives of foreign companies, in particular because of the new anti-espionage law which casts a very wide net. You can still go there in certain circumstances, but you have to be very careful, say two specialists.

In fact, three elements make business travel in China more complex and dangerous, points out a recent report by the wall street newspaper (The New Rules for Business Travel in China), from the use of cell phones to the curious Chinese customs officers.

These include the new anti-spy law (which comes into effect in July), raids on consulting firms that work with foreign companies, as well as the tightening of information flows to the world outside China. .

Regarding espionage, the legislation that is in force in China only covers offenses related to state secrets. However, the version revised by the Chinese authorities will cover “all kinds of documents or materials having a link with national security and the interests of the State”, underlines the Japanese magazine. Nikkei Asia.

Without being directly linked to this law, the Government of Canada nevertheless currently recommends that Canadians traveling to China be very careful. “Exercise a high degree of caution,” says the consular advisory from Global Affairs Canada.

The bad memory of the two Michaels

Business people here cannot ignore the misadventure that two Canadians, former diplomat Michael Kovrig and businessman Michael Spavor, experienced in China for three long years.

In 2018, Chinese authorities arrested the two men in retaliation for the arrest of a Huawei executive in Vancouver at the request of the United States. Both Michaels were finally released in 2021.

Despite everything, executives of Canadian companies can still go to China, but they must take more and more precautions, according to two specialists interviewed by Deals: Michel Juneau-Katsuya, ex-agent of the Canadian Security Intelligence Service (CSIS) and CEO of The NorthGate Group, a firm specializing in risk assessment for businesses, and Guy Saint-Jacques, ex-Canadian ambassador to China and today a fellow at the Institute of International Studies of Montreal (IEIM-UQAM).

“Those who will possibly be at risk are those who have previously worked in the military, national security and even in high government positions. It is certain that it is necessary to respect the limits of the visa and not to transgress the notes of voyage , insists Michel Juneau-Katsuya.

Canadian executives must also assume that their electronic devices (computers, tablets, cell phones) will be searched or “contaminated” in China – by spyware, for example.

“Bring only what is strictly necessary, which can be thrown away or destroyed on your return. Take it for granted that you will be watched and that your personal or bedroom effects will be searched,” said the former CSIS agent.

In his view, the fact that diplomatic relations are currently strained between Canada and China also increases the level of risk for Canadians traveling to or living in China.

“As Canadian policies will become increasingly difficult for China, there may be more personalized retaliation. In any case, our passport and our flag no longer protect us as much as before,” he laments.

The perverse effects of the anti-espionage law

For his part, Guy Saint-Jacques explains that the new anti-espionage law is particularly problematic – foreign Chambers of Commerce in China have also criticized it, because its definition of national security is very broad.

“It could lead to the arrest of representatives of companies who do market research, especially if it is a sector that China considers strategic,” said the former Canadian ambassador.

According to various reports, these strategic sectors in Beijing’s eyes include electric cars, new energy sources, infrastructure technology, information technology and industrial robotics.

In the eyes of Guy Saint-Jacques, the new anti-espionage law will have two effects on the multinationals active in China.

On the one hand, it will restrict the number of foreign companies that offer consulting services on the Chinese market, including large accounting firms. On the other hand, it will make the due diligence process more difficult when a multinational wants to acquire a Chinese company.

As for the physical security of Canadian managers in China, Guy Saint-Jacques believes that this risk is relatively limited.

“China doesn’t usually arrest business people, especially if they create jobs in China. Rather, it arrests people working for NGOs (Michael Kovrig) or in areas that China deems sensitive (Michael Spavor),” he said.

On the other hand, all the executives who go to China are monitored, he adds. Therefore, they should abide by the laws and be very careful with their communication devices due to “contamination risks”.

Choosing the right partners in China

Finally, in this less welcoming business climate in China, Canadian companies must also be more rigorous in the choice of their local business partners, according to Guy Saint-Jacques.

Between 1995 and 2019, 129 foreigners, including 29 Americans and 44 Canadians, could not leave China, according to Safeguard Defenders, a nonprofit human rights organization that monitors disappearances in China.

“Usually it was because of an argument with their Chinese partner. This is another reason to be careful in choosing a partner,” strongly recommends the former Canadian ambassador.

Since its opening to international trade at the turn of the 1980s, communist China has always had a business environment that poses certain risks for multinationals given the undemocratic nature of the regime.

However, since Xi Jinping came to power in 2013, the rules have become increasingly tighter with regard to foreign companies. The authorities are also monitoring the executives of these companies more closely.

Certainly, CEOs and managers will continue to visit China given the many business opportunities, while demonstrating great vigilance.

On the other hand, others could however be tempted to diversify their market elsewhere in Asia, in particular in the 10 countries of ASEAN (the Association of Southeast Asian Nations), the new factory of the world.