China Raises Cybersecurity Barriers to Tech Investments

China announced plans to further strengthen its “cybersecurity barrier” and solidify control over the country’s cyberspace, despite concerns that it may hurt foreign tech sector investments.

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President Xi Jinping in a recent directive issued to state agencies demanded that they “uphold the party’s leadership over the internet sector,” and he stressed the need to build a loyal team in the IT sector and ensure coordination between internet development and cybersecurity.

“Work must be done to forge a strong cybersecurity barrier and give full play to the role of information technology as a driving force for development,” he said. “It is imperative to govern cyberspace, run websites and apps and carry out online activities according to the law.”

The Chinese Communist Party succeeded in consolidating public opinion in cyberspace, established a comprehensive internet governance system and accelerated efforts to build self-reliance and strength in internet and information technology, he said, adding that “internet and information technology departments at all levels must be loyal to the party and the people” and “dare to fight cyber-terrorism and other illegal acts in cyberspace.”

The government on July 1 introduced a revamped Counter-Espionage Law to safeguard state secrets and materials related to national security from all forms of cyberattacks that target governmental bodies and China’s information infrastructure (see: New Chinese Counterespionage Law Aimed at US Tech Sector).

The new Counter-Espionage Law gives Chinese authorities, including the armed forces, sweeping powers to investigate and even seize the property of companies doing business in China, and it gives the government power to take legal action against foreign institutions suspected of espionage activities.

U.S. Chamber of Commerce President and CEO Suzanne Clark said the revised law “ratcheted up risk and uncertainty in the market” and hinted at pursuing supply chain alternatives in other countries. “Make no mistake, national security must come first – but it doesn’t have to come at the expense of our economic future,” she warned.

In a move to woo foreign investors, the government recently renewed its push to position China as a lucrative base for overseas businesses. The PRC’s State Council on June 28 said the country’s economic and technological development zones, which it said “have become a vital platform for China’s economic integration into the global industrial system,” have attracted more than 30,000 foreign-funded companies, including more than 300 Fortune 500 firms.

Assistant Minister of Commerce Chen Chunjiang said the party will continue to modernize the economic and technological development zones. “China will consider adopting stronger policies to level the playing field, smooth the flow of innovative factors and promote pragmatic cooperation between domestic and foreign companies,” the National Development and Reform Commission said.

China in March also decided to resume issuing all types of visas and announced a new policy to attract foreign investment for research and development centers. Legislators said the policy would “not only enable China to draw global resources more effectively within its market but also allow the country to further integrate into the international innovation chain.”

Despite such assurances, CPC Central Committee Member Cai Qi said at a cybersecurity conference in Beijing on Friday that the party’s supervision over the internet must be maintained and that the CCP would carry out every effort to ensure positive publicity and control over online ideological content.

“We should implement the major strategies of cyberspace security and establish a security system of a broad cyberspace by striking a balance between development and security, so as to consolidate the security barrier of China’s cyberspace,” he said. “It is essential to rely on innovation, self-reliance and empowerment for development; provide a level playing field to benefit all; shore up weak links and give full play to the role of information technology as a driving force for development.”