Minister of Commerce Gina Raimondo stated on Tuesday that U.S. companies have complained to her that China has become “uninvestable,” citing fines, raids, and other actions that have made doing business in the world’s second-largest economy risky.
Below, you will find details about some of the biggest obstacles to doing business in China in recent years.
Counter-Espionage Law
In April, Chinese lawmakers approved a comprehensive update to Beijing’s anti-espionage legislation, which bans the transfer of all information related to national security and broadens the definition of espionage.
The law, which came into effect in July, has raised alarms in the United States, which warned that foreign companies in China could be punished for normal business activities.
All “documents, data, materials, and objects related to national security and interests” are now subject to the same protection as state secrets, according to the full text of the revised law published by Xinhua. The law does not define what falls under China’s national security or interests.
t’s important to note that while the law aims to strengthen China’s ability to counter espionage threats, concerns have been raised about its potential broad interpretation and impact on foreign entities operating within China. Critics argue that the law’s vague language could be used to target a wide range of activities that authorities consider a threat to national security.
The Counter-Espionage Law has been part of a broader legal framework in China that includes other laws such as the National Security Law, the Foreign NGO Management Law, and the Cybersecurity Law, all of which play a role in shaping China’s approach to national security, intelligence, and foreign activities within its borders.
Raids and Fines
In March, Chinese authorities conducted a raid on the Beijing office of the Mintz Group, detaining all five local employees. This marked the start of a widespread crackdown on consultancy and due diligence firms, including Bain & Co’s Shanghai office and Capvision Partners.
The Beijing Municipal Bureau of Statistics later confiscated 5.34 million yuan of Mintz’s “illegal gains” and imposed an administrative fine of an equivalent amount, resulting in a total fine of about $1.5 million.
The agency stated that the company had conducted “foreign-related statistical investigations” without seeking or obtaining approval. Mintz has expressed its willingness to cooperate with Chinese authorities to resolve “any misunderstandings that may have led to these events.”
Exit Bans
China increasingly bans individuals from leaving the country, including foreign executives. An analysis by Reuters of exit ban data from the Chinese Supreme Court’s database showed that the number of cases mentioning bans multiplied eightfold between 2016 and 2022.
Slow Legal Approvals: In early August, Intel Corp canceled its $5.4 billion deal to acquire Israeli contract chipmaker Semiconductor Ltd Tower, as their merger agreement expired without approval from regulatory agencies in China.
Last year, DuPont De Nemours Inc abandoned its $5.2 billion deal to acquire electronics materials maker Rogers Corp due to delays in obtaining approval from Chinese regulatory authorities.
Questions About Fair Legal Proceedings
Minister Raimondo stated that “no reason had been given” for Chinese actions against chip manufacturer Micron Technology, whose products were restricted by Beijing earlier this year. “There has been limited fair legal process,” she said.