"China's party-state, long steeped in secrecy, is creating a black box around information on the world's second-largest economy, alarming global businesses and investors.
Prodded by President Xi Jinping's emphasis on national security, authorities in recent months have restricted or outright cut off overseas access to various databases involving corporate-registration information, patents, procurement documents, academic journals and official statistical yearbooks.
Of extra concern in recent days: Access to one of the most crucial databases on China, Shanghai-based Wind Information Co., whose economic and financial data are widely used by analysts and investors both inside and outside the country, appears to be drying up.
Following recent expansion of China's anti-espionage law, aimed at fighting perceived foreign threats, many foreign think tanks, research firms and other nonfinancial entities are finding they can't renew subscriptions to Wind over what Wind described as "compliance" issues, according to interviews with Western researchers and macroeconomic analysts.
A Wind service representative said in an email that customers who want to renew their contracts need to contact their account managers. The representative didn't elaborate.
The increased restrictions on information come as Beijing has embarked on a campaign to scrutinize and pressure Western management consultants, auditors and other service providers that multinational companies rely on to assess risks in China.
The two-pronged approach is part of a broader effort to tighten the Communist Party's control on how the rest of the world forms its views on China, according to business executives who have consulted with Chinese authorities. It is also an effort to essentially close off China from foreign influence, they said.
Behind the push, they said, is a deepening conviction held by Mr. Xi, China's most powerful leader since Mao Zedong, that the West -- the U.S. in particular -- poses existential threats to the party's hold on power. Mr. Xi presided over a Politburo meeting last week that stressed the need to "better coordinate development and security" -- party-speak widely interpreted as a signal that fending off foreign threats takes priority over embracing foreign investment.
China's State Council Information Office didn't respond to a request for comment sent on Sunday. A spokesman at the Chinese Embassy in Washington said Friday that "China is committed to protecting foreign businesses' lawful rights and interests and creating a favorable environment for foreign investment."
The broad Chinese effort is unnerving foreign businesses and investors already grappling with heightened geopolitical risks associated with their investments in China. It comes as U.S. and other foreign companies need even more corporate intelligence to navigate China's increasingly complex business environment, partly due to U.S. sanctions targeting hundreds of Chinese entities and countermoves by Beijing.
Worsening U.S.-China relations have already caused many C-suite executives to think about moving some operations out of China or otherwise reduce their China exposure.
"The harder the government makes it to understand China, by definition that will make the Chinese market less attractive to capital, especially long-term commitments," said Gary Rieschel, a venture capitalist who has invested in China for more than three decades.
In a statement Friday about China's investment climate, the U.S. Chamber of Commerce singled out the intensified government scrutiny of professional-services firms that multinationals use for risk evaluation, warning that the action "dramatically increases the uncertainties and risks of doing business" in China.
Among the firms being targeted by authorities: U.S. consulting firm Bain & Co., which said staff at its Shanghai office were recently questioned by Chinese police; U.S. due-diligence firm Mintz Group, which said staff members at its Beijing office were detained after a raid; U.K. auditor Deloitte's Beijing office, whose operations have been suspended until June on top of a roughly $31 million fine over alleged lapses in its auditing of a state-owned asset-management firm. Deloitte has said it respects the penalty decision.
In addition, Chinese police in recent months paid a surprise visit to the Shanghai office of Capvision, a provider of expert consultations and research services based in New York and Shanghai, according to people close to the firm. The police questioned Capvision's local employees about the names of Chinese experts in its network, the people said. Shanghai police and Capvision didn't respond to requests for comment.
While foreign executives operating in China said meetings with or visits by authorities aren't necessarily unusual, the detentions and general intensity of the current campaign have been notable, especially as the push has been paired with tightening access to databases like Wind.
"On the grounds of national security, foreign access to various databases has been restricted," said Gerard DiPippo, a China expert at the Center for Strategic and International Studies, a Washington think tank. "The net effect will be less to improve China's national security and more to isolate China from overseas researchers trying to understand the country."
The current campaign signals that Beijing feels confident that companies rely too much on China to pick up and leave. Many foreign companies still see China as a crucial market, and companies including those that sell to Chinese consumers have sought to boost their footprint in the country. A string of senior foreign executives have paid visits in recent months to check in with local offices and attend government-backed conferences.
But recent surveys also show more U.S. and European companies are shifting priorities to countries other than China when making their investment decisions.
The continuing move to wall off China has been years in the making. Beijing started to beef up laws and regulations aimed at guarding what it broadly defines as state secrets since 2010, under Mr. Xi's predecessor, Hu Jintao.
Over the past decade, that effort has gained urgency under Mr. Xi.
In years past, Chinese authorities had mainly targeted speech by political dissidents while commentary about the economy and reporting on business had been left relatively unfettered.
Since 2014, China has passed laws aimed at safeguarding national security. For instance, a data-security law and new rules restricting shipment of data overseas, put in place in 2021, have made it hard for foreign companies and investors to get information such as that on supplies and corporate financial statements. Chinese databases, ranging from academic ones like China National Knowledge Infrastructure to corporate ones, have become much harder to access from overseas.
Business executives said they worry that the expanded anti-espionage law passed by China's legislature last week could criminalize everyday business activities like gathering intelligence on local markets and business partners by sweeping them up into a widened definition of espionage." [1]
Having more information about the Chinese market makes it much easier to plan sanctions that would theoretically be more painful for China and less painful for the West. China seems to have learned from this history.
1. China Curbs Information Flow, Unnerving Global Businesses
Wei, Lingling; Kubota, Yoko; Strumpf, Dan. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 01 May 2023: A.1.
