China Expands Scope of ‘State Secrets’ Law in Security Push

Ms. Choyleva said many companies will be trapped in a state of “paralysis” while they wait to see how China applies the new provisions in the law.

It is the latest example of the country’s heightened vigilance of state security under the leadership of Xi Jinping. Over the last few years, China has progressively fortified its national security and data sharing laws, while warning about the risks of spying under the cloak of business.

But the strengthening of China’s national security laws has rattled many foreign businesses and investors. Many of the changes exercise an unclear and expansive criteria of what would constitute a national security risk, raising the possibility that the rules could be applied arbitrarily.

The crackdown has amplified the challenges of investing in China at a time when foreign direct investment in the country has fallen to its lowest levels in three decades, as companies are increasingly unwilling to endure the trade-offs of operating in China for an economy no longer growing by leaps and bounds.

Jens Eskelund, the president of the European Union Chamber of Commerce in China, noted that the changes to the state secrets law came a week after the country’s cabinet, the State Council, said that one of the year’s priorities was to attract more foreign investment by shoring up investor confidence.