At the first time, the new Law of Foreign Relations introduced an official framework of extraterritorial jurisdiction of Chinese law while upholding the fundamental principles of international law and international relations. In the context of sanctions and counter-sanctions between China and other countries as an example, the new law empowers the Chinese government to implement necessary countermeasures and restrictive measures as a response to foreign sanctions for the purpose of defending China’s national security and development interests.

The newly revised China Counterespionage Law (“Counterespionage Law” or “the Law”) is another example of such endeavors in defending China’s national security interest. The original Law was made in 2014 at the 11th Meeting of the Standing Committee of the 12th National People’s Congress of China. The Law sets up the law enforcement authorities and rules by specifying the duties of all state authorities, military, political parties, public organizations, corporations and institutions in preventing and deterring any conducts of espionage and safeguarding national security.

With its target on espionage conducts, the Law’s major revision in 2023 expands its applicable scope from “state secrets and intelligence” to "state secrets, intelligence, and other documents, data, materials, and items relating to the national security and interest", which can arguably apply to MNCs’ daily operations and cross-board communications.

The Law grants Chinese law enforcement a great authority in seizing, searching, detaining, arresting and investigating cases. MNCs with operations in China should be fully aware of their compliance responsibilities under the Law and carefully handle any sensitive data and information sharing that may have implications of national security, major social or economic interests, political or foreign affair issues. The recent law enforcement cases against certain consulting firms in this regard have proved real compliance risks.

According to Law on Guarding State Secrets, state secrets refer to matters that relate to national security and interests as determined under statutory procedures and to which access is vested in a limited scope of persons during a given period of time. State secrets involve state affairs, national defense and military, diplomatic and foreign affair activities, scientific and technological development, and similar matters bearing national economic and social development interests.

According to Interpretation of the Supreme People's Court on Several Issues concerning the Specific Application of Law in the Trial of Cases of Stealing, Spying into, Buying or Unlawfully Supplying State Secrets or Intelligence for Entities outside the Territory of China, intelligence means matters that concern national security and interests and have not yet been published or shall not be published in accordance with relevant provisions.

The revised Counterespionage Law does not include explicit interpretations on the other items relating to national security and interests noted above. We can make inference from the recent legislations that similarly focus on China’s national security and social economic interests.

In China Data Security Law, national security interest is defined as matters that have a great importance in economic and social development, and can cause harms to national security, public interests, or lawful rights and interests of individuals and organizations once they are tampered, destructed, or divulged or illegally acquired or utilized.

According to the Administrative Measures on Data Security in the Field of Industry and Information Technology (for Trial Implementation), critical data and important data in defense and military industry, science and technology, important ecological resources, public health and security, critical information infrastructure, networks, AI and other industries can have national security and interest concerns.

Similarly a draft China National Standard -- Guideline for Identifying Important Data --- suggests that identification of important data be focused on security impacts and  doing so from the perspectives of national security, economic operation, social stability, public health and safety, etc.

Therefore, important data, sensitive materials, and key technologies that are normally possessed by MNCs can fall in the scope of Counterespionage Law once the items have national security and social or economic interest implications. Within the context of current geopolitics across different regions, MNCs are advised to very carefully manage their business operation and pay attention to the compliance requirements under these new laws.

Understand your information and data. Corporations should continue to improve their compliance programs to safeguard critical information and data. Senior managers are advised to have a full picture of such sensitive data and their legal implications in China.

Focus on data security and protection. Corporations should continue working on their cyber security and data security protection. Personal information protection is only part of the efforts. Major efforts in the national security context for MNCs should be on the key industrial materials and technologies. When the MNCs have sensitive clients from Chinese government and SOEs, client information and end user information can also become critical data or important data.

Smart navigation through complex situation. Conflicts and disputes in export control and sanctions can make MNCs’ businesses even more complex. The information and data relating to sanctioned entities and restricted items, and related government investigations, can become very sensitive and imply national security concerns. MNCs are advised to have a full assessment of the risks and prepare action plans as response.

Monitor development and follow up closely. The Foreign Relations Law, which came into effect on the same day as the Counterespionage Law, clarifies that China will strengthen the implementation and application of laws in foreign-related fields. New law enforcement actions and judicial measures are to come. MNCs are advised to monitor closely their operation and compliance risks.